Ladies and gentlemen, welcome to the Titan International Incorporated Fourth Quarter 2015 Earnings Conference Call. During this session, all lines will be muted until the question-and-answer portion of the call. [Operator Instructions] Any statements made in the course of the conference call that states the company’s or management's intentions, hopes, beliefs, expectations or predictions for the future are considered forward-looking statements. Please note that the Safe Harbor statements contained in the company's latest Form 10-K and Form 10-Q filed with the Securities and Exchange Commission extend to this conference call and any forward-looking statements involve risks and uncertainties as detailed therein. At this time, I would like to introduce Titan Chairman and CEO, Maurice Taylor.

Thank you, there. Good morning, everyone. I assume if you’re on the call, you have already received the press release, and the 10-Q information. 2015 was not a good year, which we all kind of knew going into it. Hoping that would balance out at Titan. This is the third year now for Titan that we have had seen a downward drift in sales and this one was a big one. We believe that in this period of time that we are getting the ship as I say, lean and lean, we have got a lot of people and we have gone and been consolidating. We now are in the phase of where we are reducing cost, and reducing cost from the standpoint of engineering, a lot of cost out of various products. I can get real technical and explain that you have a disc that you put in a wheel and it’s a full 360. If you take that blank and make it smaller and you just have little scallops on it and well enforced thoughts, you have faced a lot, but you have not diminished the strength or the character of that product in anyway, but you will reduce the cost, because you reduce them on the steel and the welding going into it. This is a process that we keep going on. The good thing about what we have seen, as I said in my CEO comment is the price of steel has really dropped, the price of oil has dropped, so price of natural rubber, so we expect that going out into this next year 2016, we believe that it’s going to be pretty close on the revenue side as what 2015 was and that probably because of the situation we did last November for us…

Thanks, Maurice. Good morning everybody. I am stating the obvious, when I say 2015 was a challenging year, we got hit with a significant demand reductions in all our end markets that were caused by conditions that is tough as anything we faced in a long, long time. At the end of the day, our financial results are the scorecard that we are measured by. There is a story behind our numbers that isn’t published in the black and white results. I want to take a few minutes this morning to talk about the type of story 2015, and then I will turn over to John, let him dive into the financials. At the start of 2015, we launched a program called our business improvement framework that got our organization and our people focused on making the tough decisions to fight the impact of this significant decline that we were seeing and kind of see in our market conditions and then obviously to our overall sales levels. Basically this program could have called our markets are ugly, we better do something about. This business improvement program has empowered our teams to aggressively with the necessary reductions to our operating cost throughout 2015. So we really spread it far and wide and we empowered our people to take the actions that were needed. For example, as Maurice alluded to in his release, in his comments earlier, we have reduced our headcount by over 2,500 people from the start of 2014 in certain locations and have been able to increase their per person productivity level during that process, during that time period where we are reducing headcount. That’s not easy to do. Another example can be seen in our SG&A costs for this most recent quarter and the fourth quarter of 2015,…

Thanks, Paul. Good morning everyone. Well, as both Maurice and Paul had mentioned, 2015 was a very challenging year, but despite the difficult year, we have adapted well by focusing on what we control. Quality continues to improve, costs have been managed diligently and we continue to reduce headcount commensurate with volume. Our business improvement framework that Paul referred to, best as we pointed, has made 2015 a relative success in terms of being able to mitigate the negative consequence associated with our significant sales decline. While our sales were down 26% to prior year adjusted gross margin, as a percent of sales in 2015 actually improved 40 basis points. Income from operations was a loss of $24 million. This was only $3 million worse versus the prior year after adjustment. So on a $500 million reduction sales, we held operating income nearly flat. This resulted in only 0.6% decremental margin, so it’s less than 1%. So let’s turn our attention to operations and talk about revenue. Sales for the year were $1.4 billion, this was down $500 million or 26%. The year-over-year decrease was driven mostly by currency and ag at $198 million and $208 million respectively. The remaining $95 million variance comprises our earthmoving/construction and consumer segments. I referenced currency, this drove a reduction in sales of $198 million or 40% of our revenue decline. This impact was helped depress all the international locations, our Latin America, Undercarriage, Russia, Europe and Australia businesses. The most significant rate movements were represented by the ruble 59%, the real at 42% and euro 20%. If you adjust for the currency impact that I just outlined, sales declined only 16% versus the reported 26%. As we break down our segment, let’s start with Ag. Ag continues to be the key driver to…

[Operator Instructions] We have a question from Sean Williams from BB&T Capital Markets. Please go ahead sir.

Hi, good morning this is Rob Nichol on for Sean, how are you?

Good morning.

Good morning, so you mentioned revenues are going to be slightly up in 2016. I was wondering if you could just maybe give a little more color and walk us through each segment. What should we be expecting up or down in Ag, earthmoving equipment and consumer?

In our numbers and what was justifies that is the - it’s twofold. Number one, we believe that the tires for Europe, Africa, the Middle East, Russia with the Goodyear brand is going to be bring us more revenue. Paul has been working on that with Bill Campbell, so we expect that sometime before the end of this quarter to be shipping or have it wrapped up sending tires from there, okay, from our overseas facilities. We can start off by backing it up with, out of Brazil which is a low cost producer now, but eventually we’re going to produce some over in Europe. Everyone should understand that when Goodyear was running their French plant, they had a plant in France, two in Turkey, and one in Port Elizabeth and when you look down the year, they generated between 250 million and 300 million in sales dollars. We've had a number of the distributors call us and wanting tires. So, the problem has been in getting the spreadsheet all the work that you have to do because of changes you have a specsheet but you might be using a different nylon for your fabric et cetera. So you have to go through every single one of them and we’ve been doing that. And that will give you, it takes about that long to be able to build tires and test them. We believe that that’s what’s going to bring us on the Ag side. The situation with the ITM, ITM has been working on their [indiscernible] and they were mainly an OE, so they’ve been concentrating the last two years to go much heavier into the aftermarket. And they've been very successful. So, once you get into the aftermarket, as this is first quarter from them is over their…

Okay, that's very helpful. Thank you for the detail. And the Canadian reclamation plan that you called out in the press release, how should we be thinking about that in terms of revenue contribution in 2016?

It will contribute. Any time you build something brand new, something that’s kind of like new, what people will say, I will be going up there in the next two weeks. The buildings are all up, the equipment is there except for the special wash machine, which should ship in the next 10 days. The big thing is as you got to clean these tires before you put them into the reactors from the standpoint you want to get the carbon black. You don’t want a lot of dirt in there and all you are doing is heating up dirt, making up so that you got to clear your carbon black and everything else. So we are on schedule. As we said before, they will have that thing up and move them at full bore on April 1. Now, I have a test run in the latter part of March and if everything goes right, this is then - it’s almost five years so we’ve been doing this. I think our friends Suncorp, we are on Suncorp’s property and we’ve worked with them. They are moving the tires into the property right next to us. We expect good things, but as I tell everyone, you are only looking at about a store operation as we got about 40 million in assets, I mean in revenues and actually going to generate there, but it’s got big 50% plus on EBITDA. And so I think we’ve in our numbers, I would say we are pretty close to only looking at about 20 million in revenue of which we own 60% of that business. We have other partners in it.

All right, that’s extremely helpful. Thank you. I will hop back in the queue.

Thank you

Our next question is from Larry DeMaria from William Blair. Please go ahead.

Couple of questions. First, can you give us a hint on maybe how you see the cadence of ag sales throughout the year, I guess for we kind of comp up for year or is it second half or just how you see the cadence throughout in your ag side?

Well, the first thing, as I mentioned, if you look at the cash receipts, I spend an awful lot time on the road and I’ve been with an awful lot of dealers whether they are a Case or a Deere, almost all of them have been moving a lot of used equipment. And I think you have to give the OEs a lot of credit instead of going out and banging up the market with new stuff, they have been sitting up pretty good, taking their punishment and letting the dealers show off a lot of their trade-ins. So the dealers have reduced the pricing of their used equipment, just trying to get it down, mainly because they wish to get it down. You got a lot of big farmers who might trade in 10 big tractors to buy 10 of the newer ones, but now that the price of the trade-ins is way down, so they are probably - they are looking at, well, let’s just use them for another year, but they got the cash. When you look at cash receipts farmers are getting, unless the farmer went out and bought an awful lot of land [indiscernible] it’s pretty good. While I was up in - yesterday I was in Fargo, I was in, here in South Dakota and you can see the - they are getting all ready to plant.

I think you’ve got the - today, yeah, corn planting is going to be up, and prices are going to be down for corn, so I guess we are just trying to figure out if maybe some of the farmers are okay, but will your ag sales be up throughout the year or is it second half loaded or how do we the cadence quarterly through the year?

Well, I think what we are going to see is, in ours, I think that we will probably be stronger in ag sales in quarter-wise in second quarter when we will be first quarter and that’s because we flushed out the inventory. The OEs were switching our ag sales and the second quarter will be dependent on various parts of the country and weather. In other words, if you have a wet spring, our ag sales are just going to jump pretty good, because you got to have bigger flotation tires and that’s the way we make them. Nobody else makes as many as we do and no one has probably the best margins. Then when you - the summer will be like most summers, but then come fall, it turns out too, if it’s a dry fall which it was - fall last year was probably the first time in 20 years it was such a dry fall. We did not have a big rush of taking tires out for combines and tractors because it was so nice. If it gets to be wet, then that’s going to be a real big boom. So we are dependent on weather.

I understand. Let me ask it different way then, maybe what does the order book look like year-over-year I guess at this point?

I would think every quarter because nobody knows what the -

The order book year-over-year.

Yeah, the order book, I will tell you it’s a mixed bag. The big items are not being ordered till the last moment, okay. You are average say from 150 horsepower down, your order deck is moving up. If we are above it which is our bread and butter, it’s more of the last moment. And the same thing is going on in the aftermarket. Now the big cojones for us of course is the law suit we filed on everybody from China, India and everything and that’s going to make a big differential, okay. So now that we’ve - the DLC has already said, hey, we are moving forward. International Trade Commission agreed on India and Sri Lanka. You were around when I did it before and we were pretty successful. There is no doubt we will be successful now. We are going to try it different because the ICT didn’t touch the tire and wheel assemblies because there is not enough volume there. It has to be 3% and it wasn’t. But our point, as my press release said, this is nuts. Steel, you have duties on steel and everything, but technically if you are mixing together there is no duty. So I think with our firms as steel works, we are going to have to do that administratively and I think we are in that too. So line up the cry towels from some people, but it’s the law and I think the law is on our side and we will prevail. And when that happens, you can just throw up the chart, we can figure out how many hundreds of millions of dollars and that’s not outcome of the Titan and my friends fire stone, it’s just we always have to lead and pay the bill. I think that right now everybody has been put on notice, so if you go buy a bunch of stuff now, we win. The duty goes back to the time which you have been given notice if the lawsuit may pick it up.

Okay, it goes back retroactively if -

Yeah.

Okay, that’s good deal. Good luck with. Maurice, last question and I will jump off. Could you just help us with EBITDA and ITM, because you said obviously it could be for sale, but how do we think about maybe trailing 12-month EBITDA something like that just so we get a sense of value? Thanks and good luck this year, Maurice.

Well, I’d rather not, because we never break anything out [indiscernible] but let’s put it this way. It’s north over a nine - I mean in the nine figures then we would be interested in selling it.

Okay, thanks, Maurice. Good luck.

Yes, thank you.

Your next question is from Joe Gomes from William Smith. Please go ahead.

Good morning.

Good morning.

Most of my questions have been answered but just two quick ones.

Then you’ve got four then? Two quick ones.

Given where the stock price is today, the fact that you guys have some nice cash on the balance sheet projecting positive cash flow for this year, what’s the appetitive for buying back stock these days?

Well, I would love to have bought a bunch of stock when it was down around $3, $2.80 whatever it went to, I would love to. The only problem I am restricted. Titan is restricted. We can’t do it, because of the bonds, the big senior bonds, okay. And we’ve had enough lawyers look at it, we’ve looked at it.

Okay. So you can’t do anything in terms of any buyback at all?

No.

Okay.

I can always buy bonds back, that we can do.

And you talked a little bit in the past about making some more strides in the aftermarket and I was just wondering if you might be able to give us a little more color as to what you guys are seeing and how that is going and gaining share in the aftermarket.

Well, you see, you have two situations that we are the only one that has this situation. You have the tires that have been the same tires for the last 40 years, all right. Now you sell on the aftermarket, you sell them to tire dealers, their wholesalers et cetera, so you got a sales force that’s out doing that. Then you have the move which Paul explained in the LSW tires which we have gone out and we have like 180 farmers now who have turned around and found out that you put a set of LSW tires on your tractor, your combines, sprayer, you implement, you can turn around and that equipment will perform better even a frigging grain cart will perform better. So what is happening is that in order to make that channel we only have a couple what I would call very progressive dealers and tires who have taken the LSW because you got a wheel and a tire. Now, so we have gone to equipment dealers, the guys that sell equipment and the farmers. So we're doing both so that we went to the big farmers, the big farmers aren’t buying. We have made them house accounts, we call that our R&D farms. But what happens when other farmers see them, they want the same thing. They go to the equipment dealer whether it’s a Deere, a Case or whoever I call. And then we sell right to that equipment dealer, because you can only - you have to buy a tire and a wheel. Once you got yourself setup, you go set to buy tires. So that's what we're doing there and we're doing the same thing in the construction business, going to big huge construction contractors. So that's the long term, who is going to be our investment, the product or me.

Okay, thanks for insight. Appreciate it.

You are welcome.

Our next question is Alex Blanton from Clear Harbor Capital. Please go ahead.

You talked a lot about gross margin, the gross profit, but I don’t think you mentioned what the decremental margin was in the quarter. Your sales were down $75.5 million and in that your gross profit only were down $6.5 million, which is 8.6%, which is highly unusual and you don't see that very often that kind of sales decline.

Do you want to cut shot that Paul or John?

Yeah I would like to just a little more information on how you achieve that, what are the kinds of things you are doing in your plans? I know you mentioned materials costs and so on, but what about the efficiencies in the plants? What are you doing there?

What is going down if - as Paul talked about - and what happens is, you start reviewing all of the - everything that goes into a tire or everything that goes into the wheel. I mentioned one about the scallops versus a full 360 contact. So in a welding process where you might have - just think of a 46-inch size big wheel, well it’s got 360 valve. You can put four 6-inch valves and that's all you need to keep that center if it’s pressed in there in that wheel. And you would have some scallops on that tank. So what you do is, you are going to buy because it's a circle and punching a circle out of the square if you turn around and make your square little smaller, you are only chopping the corners of the square off and when you form it, those come up and then you weld those. Well, when you are dealing with big steel, you’ve got the situation where you're taking a lot of metal out. So a lot of these items, that's for real. Now, let's get to a tire, you get to a tire and the large, we’re the largest when it comes to all these 100 horsepower and down, let's just say 40 and above tractors and those are going up this year and we supply, whether it's Mahindra, LS Tractor, [Technical Difficulty] Kubota that come in and the body, tire and wheel assemblies. The same situation there when you look at the tires, a lot of times, they just said they want this tire. So when you look at certain equipment that's out in the world, you see that they’ve got various tires where you can take a lot of cost out of that tire, that tire is going to run up to 40 years and so they just got used to it. They don't need that tire on that piece of equipment. So as they are looking at it, you can make for it, it looks the same, but you can take an awful lot of stuff inside of that.

Alex, to answer your question on that Alex, I mean, it's really indicative of all the efforts that we've put in over the last couple of years to get to this point. We've highlighted a number of those factors that have led to this. I mean, our scrap rates are now lower than they were last year, cost of quality through our warranty continues to go down. We have plants that have gotten more efficient as we have reduced headcount and what Maurice is alluding to here, we’re taking out raw materials. Couple of examples on that, we've put in sensors in one of our large tire plants that can take out the variability, as you go and finance any time you got variation, it adds risk and decreases value. Well, we've taken variability out, so now we’re putting less material into our gauges of the calendar rubber. We’re able to spread our fabric better with these sensors and get more out of our fabric than we used to. And so, these are incremental things. So it's not one thing that we can sit here and say, yeah, this is the holy grail that made it all happen, but there is definitely a lot of initiatives that have kind of added up to the secret sauce that has really gotten us to this year where we saw an improvement in our gross margin percent. So I think what we will do in 2016 is see those initiatives roll forward and then continue to build upon them. And so the only thing we got to do is make sure we keep getting the volume into the plants and absorb as much of the fixed costs as we can.

Well, that's a good point, because the fruits are really going to come when the sales start going up, correct?

That's exactly right.

Margins probably above where they've ever been.

The $5.5 million I alluded to in the plant that I was at this week, I mean those are permanent improvements, they don't go away and like I said, it comes from stuff that certainly we have on the table now that did we have it before, I’m not saying we didn't have it before, but what really what the last couple of years has done is we've gotten the team really pushing more aggressively towards the initiatives that benefit the company and so there is good things that come out of the downturn, it's painful living through it, but there is definitely good things that will benefit us in the long term.

Thank you.

Hey, Alex. This is John. I want to make a couple more comments on this. During the course of 2015, we had upwards of 250 projects in play that materialized in our results and the comment you made and I made it during kind of my section was these are accumulative, so these are permanent changes and by the way, it's not just cost reduction, it’s profit improvement. We've delved into areas like pricing, attacking our off-invoice programs, we have growth initiatives relative to sales, operating expense redeployment in terms of driving more value creation. So there is a lot going on here, and that pipeline continues to be filled and replenished and so it's just a machine that continues to turn relative to contribution to the results you're seeing.

And our next question is from Anish Kumar [ph] from Private Investor. Please go ahead, sir.

A quick question on CapEx. Looking at the guidance, CapEx has been kind of up-and-down over the last few years and so wanted to get a sense of what you think CapEx over the long-term should look like on a yearly basis on average?

Well, the first thing is, you have what you call a maintenance CapEx, okay. Maintenance CapEx for all the factories worldwide. We probably only have to be real close to about 20 million [ph], that’s where most of the other stuff you have to keep doing. Safety, environment, or whatever. But in the - then it's like anything else, everybody as both Paul and John. You go to every factory, every factory [Technical Difficulty]

We’ll take our next question. Our next question is from David Tamberrino from Goldman Sachs. Please go ahead.

Hi. Thank you for taking my question. Just wanted to recap on the LSW shipments portion, how much was that as a percentage of your overall sales for 2015?

[Technical Difficulty]

How does that look compared to 2014's level of sales for LSW tires?

I haven't even looked at 2014, so I just didn’t - I don't know.

David, it’s continued to increase. The trend lines look good. In a recent meeting we had with our management team, our ag product managers, extremely confident that the trend line for 2016 will continue to get better than what we saw when you look at ‘14. So we have been very positive.

I can tell you right now that the largest farmer in Illinois who farms soybean corn, there is no tractors from other degreasing machine. They came with new LSWs, all his compounds, I believe he bought, that's either 12 or 14 new compounds and those all have a big 12, 50, 46 [ph] LSWs, both front and stair, the 850s on the back. And I know in Iowa, a dealer out there has been, he's been running a program where he would switch out and he got to use tractor, he will use compound, it will switch him out and put LSWs on for the farmers. So that's too up in Canada, that's moving. Most of the equipment and the big stuff up to there, we’re going to be looking at. The big thing about the LSW is because you work at lower inflation pressure, you land up with less compaction. Number two, you ever see all these compounds, ask yourself, well, why the hell [indiscernible] because they think that's a flotation and they can get them out to be stable, compound. Military for almost 20 years has grown super singles, what a big super single on that, you outperform everything. Instead of having four tires, you have two, you get better pull, better fuel, better ride, less compaction. So it is a big country, so the next show we have right in drive is in Arizona. Most people don't know, but the farmers down there are dairy farmers. We are going to keep going, just like automotive, went to automotive like a brainstorm, took about six, seven years or so.

That's helpful. And then Paul, thanks for the comment on the trend line. I mean, is there anything that you guys are the ag managers seeing from an order book in terms of an inflection or is it just a steady increase from here?

Yes. I think what we’re seeing is a steady increase, David. The inflection point comes from many different sources. I think what Maurie talked about earlier in his comments with the test farms that we have, as that population base grows and the acceptance and I read a few of the comments from those reports, which are just a small subset of the positive comments we get, the inflection point comes when that population base just continues to spread the word and so I think our job is pretty simple from the standpoint that we have a great product that makes equipment perform better, we just got to continue to get it out there in the market, build good products and develop new products to continue to fill up the product portfolio. So I think we were probably more complicated than we needed to at the beginning, we approached it more of a disruptive technology that is tougher to sell, I think we really just got to look at it as just, it's a sustaining technology taking wheels and tires that already exist in the marketplace and just making them better. And so I think we really got the team focus, we got a good group of test farms. Like Maurie said, we've got equipment dealers that are pushing the product hard. We’re in the OEM books, the market recognition of LSW is strong as I mentioned, 23 points higher than IF and VF. So all the trend lines are good and positive. Is there an inflection point, I believe there is one coming, but I don't think there is anything that we could sit here and point to specifically right now.

Okay, thank you. That's very helpful. And then on the working capital side, with the launch of TTRC and the build out of the Goodyear business in Europe, what are you guys thinking or what does it look like for the full year in terms of working cap, because I think that was a pretty meaningful contributor to free cash flow being positive for the year in 2015. I just like to get your thoughts on what that's going to look like for 2016?

Well, I don't think what's happened up in the oil sands has basically been spent and we've already bought the malls and everything for Goodyear. So what we have is a factory, it goes through - you’re just putting at the end. The biggest expense is what you already have, the bodies, the engineering, in fact our Russian plant, just added in the carrying side, they added another shift because of their orders. So that's what it is, you're not talking, this is no big money for big locks yet. Okay.

There is no additional inventory build for the pipeline of orders in Europe for Goodyear branded farm tires?

I can make a couple of comments here. In terms of the tire reclamation, we don't build anything. So we’re recycling tires. So there really shouldn't be much of an effect on working capital there, and in terms of tires, the initial tires that we saw in the Europe are being sourced from North America and I don't see that having a material impact on inventory or working capital as well.

And then just within your expectations I think to be free cash flow positive for 2016, what's embedded in your working capital assumptions?

Working capital, we fully expect to improve as I said during my section. Initially, with the EVA framework, there is a lot of emphasis on productivity and profitable growth, in fact, the business improvement framework that was mentioned, 75% of those initiatives I talked about, 250 some odd that flowed through 2015 were related to the plants and productivity improvements. So that's where our focus has been. In 2016, we have an acute focus on working capital improvement. So I expect working capital to contribute to cash generation in 2016.

Thank you, that's helpful. And then just lastly for the quarter, SG&A cost controls look pretty strong, I think, in total, with R&D and royalty, it's about 36 million, that was down sequentially from around 40 million in the third quarter. Is that 36 million, is that a sustainable level, can we annualize that for the full year in 2016, or should there be any reason for SG&A to move upward from there?

Yeah. I mean with SG&A, you had some currency impact and some one-time items. So no, I wouldn't think that level would be sustainable. But with that being said, we have continued to reduce operating expenses and I've said on previous calls that, relatively speaking, when we - in 2013, certainly higher level of sales, our operating expenses is fairly lean and what we've done, even though we've reduced it, we have also looked for opportunities to redeploy it from lower value opportunities to higher value. So we’ll continue to do that. I mean at the end of the day, it's about profit dollars, at the end of that P&L statement and sometimes we are going to have to invest to produce more profit and so we’ll continue to look for those opportunities.

And our last question for today is Tom O'Shea from Castle Hill. Please go ahead.

Hi, I don't know if you already said it, but could you tell us what the EBITDA was in Q4 and for full-year 2015 EBITDA?

John?

I have it. So adjusted EBITDA for Q4 was 3.2 million, full-year adjusted EBITDA was 54 million.

And do you have the year ago-s?

Yes. For 12 months, the year ago was 89 million and I don't have Q4 of last year at my fingertips. I believe it was roughly about 8 million or 9 million.

Thanks very much. And you said 20 million minimum CapEx and then do you have an idea of what your extra spend might be for 2016 to get to your free cash flow positive number?

Yes. We’re looking at, I think we put out between 30 and 35 in that range.

Thanks very much.

You're welcome and thanks everybody whoever stayed on. Have a good weekend.

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