Ladies and gentlemen, welcome to the Titan International, Inc. Second Quarter 2016 Earnings Conference Call. During this session, all lines will be muted until the question-and-answer portion of the call. [Operator Instructions] Any statements made in the course of the conference call that state the Company’s or management’s intentions, hopes, beliefs, expectations, or predictions for the future are considered forward-looking statements. Please note that the Safe Harbor statements contained in the Company’s latest Form 10-K and Form 10-Q filed with the Securities and Exchange Commission extend to this conference call and any forward-looking statements involving risks and uncertainties as detailed therein. At this time, I would like to introduce Titan Chairman and CEO, Maurice Taylor. Please go ahead.

Good morning, everyone. You have the second quarter – if you’re on the call, you should have all of the numbers and everything. It was not what we expected, but there’s some good and some bad. I want to take a few moments to cover a few things on it. The markets at the OE level, especially in the big iron, are down. You can come up with all the reasons people can, but I think the market is not going to move on the big iron until after the harvest this year. The dealers had, what, first time in 100 years – four straight down years they’re going to have. And Caterpillar – I don’t know how far, but I know it goes back before I was born, and that’s a long time. So what I’d like to do, because there’s a lot of good, and a lot of things that we have been doing and we have been doing them for 18 months. It’s just how far down you have to go to get it. On the wheel side, the wheels strictly, in our opinion, is mainly an OE business. And with your big majors dropping and dropping, that’s what happens into your wheel business. And 85% of our business is OEs. Wheels – there’s not a large aftermarket whatsoever there. But our wheel business is wholly up, mainly because the small under-100 horsepower has continued stay pretty steady. In fact, slight upticks with certain companies. We have also – most of you won’t realize that you have a limit to how big you can get at a certain OE. For years, actually went 11 straight years, we were the main almost 100% supplier to our friends at Mother Deere. But since Sarbanes-Oxley, you’re capped at 80%. The…

Sounds good, Morry. Thanks, Morry, and good morning, everybody. The story with our markets continues as same. You’ve already heard it today, and you’ve seen it before. As Morry said, it feels like we’re bouncing around somewhere near the bottom. But I’m stating the obvious in saying it would be great to get some help from commodity prices to enjoy some tailwinds. We had a nice brief run with corn up to about $4.40. U.S. folks here in the central farming belt saw a really hot start to the summer. Real dry as well. And then the rains came, and now we find corn back in the trenches, around $3.30. But I do want to note – I really believe the Titan team and our organization has and continues to do a really solid job at battling these tough market conditions. This quarter our sales were down over 12%. We did manage to raise our gross profit margin by 10 basis points. I’ve said this before – and will continue to say it – is that our team really has made the difficult decisions on a timely basis that has enabled us to really successfully navigate our way through these continuing challenges in the market conditions. So that’s enough on the market conditions at the current time. Let me jump over now and talk about some of the good things going on here that will benefit us into the future. Last quarter I mentioned the changes and additions we made to our sales organization as we reached out and were able to snag some talent from the competitors. Those folks are off and running. And one of those new hires has already signed up over 140 new dealers into our associate dealer program that we kicked off this year. I…

Thank you, very much. [Operator Instructions] And our first question comes from Brent Rystrom of Feltl and Company. Please go ahead.

Good morning, guys.

Good morning.

Good morning, Brent.

Can you give us a little more clarity or update on the reentry into the European market with the Goodyear brand?

Yes. We have picked our dealers. We went over and went through all the dealers. We have the small sizes. We have the molds for that. And we are in negotiations with a company to produce some of those tires down into the, let’s just say, in the southern part of Europe. The molds should start arriving at the Russian facility September/October. And that’s for the larger sizes. We have selected a few of the – what we would call the radial for the aftermarket with our dealers. But we have been also pushing as fast as we can for our LSWs. And the reason for the LSW is that in Europe, tractors are also used as a pickup. And that’s mainly because of the price of fuel. And when you turn around and you put an LSW on, we can – they have a width limit, but with our LSWs, because of the OD and reducing power hop and road lope, they can take those tires on a tractor. And as fast as that tractor can go, they’ll be able to go. JCB has a tractor out that – they captured a certain part of the market, because that thing could really roll down the highway besides out in the fields. So with all salespeople over there that we have talked to, and a lot of them are ex-Goodyear people, that’s the way to approach that market. Because, as you might know, that market over there is a very, very competitive market, with not only the Chinese throwing tires in, Indians throwing tires in, and then you have the combination of Trelleborg-Mitas, with Trelleborg buying out Mitas, that’s trying to, I would say, get tire business and try to bring the pricing up. But I think that’s – when we come in out of Russia, we should have a – we want to do it with a special product that we can make some money with. And that’s what we’re doing there.

Did you see, Morry – will there be sales in the September quarter? Is it more likely December? When will the sales kind of start…

In Russia – the Russian sales, they should start latter part of – well, there will be a little bit in September. But we should see them October, November, and December.

And a quick reminder – how big was Goodyear in Europe at their peak prior to kind of giving it all away?

Goodyear at their peak, I believe, going back, was some $300 million-some. At the last they did about $100 million. But when they announced their closure, that cost us, because of the way they did it, that cost us close to $100 million. And the big iron that is shipped in, what do you call it, an 8000 or a 9000, those were the vehicles that got shipped over to the – anyplace over there, including Africa and everything. So we had that business, putting it on tractors here in the States, because they are all made in Waterloo, Iowa. And that’s the same with Case. So that was a big hit. And now that we have it back, as soon as we start getting the dealerships – because whether it’s Mother Deere, whether it’s CNH, whoever, it’s got to do with having the service to take care of the tires. And we have the largest – through the Goodyear dealerships worldwide, we have the largest service working aftermarket warranty situation.

All right. Thank you for that. Can you guys give us a little more clarity on what’s driving the improvement in gross margin on the sales decline? I would assume it’s a combination of getting better at the pricing; Paul, you mentioned some of the things you’re doing as far as improving sourcing costs and other things. But can you give us little more detail on kind of what’s going on there?

Yes. In this type of market, Brent, it’s really – it’s more of a smorgasbord that is driving the improvement than one thing in particular. We did get the improvement in volumes and undercarriage that helped us. We did get a bounce in profit in durability, driven by primarily cost controls. Russia’s up on volume. Australia is up on revenue, along with some cost controls. Then you factor in some of the price, the savings on supply chain. We got a little bit of improvement on the pricing side. So it’s not a – sorry I can’t just give you one simple answer, because it really – when you look at the bridge from kind of 2015 to 2016, it’s just – and across the board, getting little wins in all the places you can. It’s just a reflection of the market we’re in. You are not going to get anything moving in one big direction. You’re just going to have to go fight a lot of little battles. And I think that’s attributable to what our team has done and how we’ve been doing it, that we are able to get enough of these little wins to offset the significant decline that we saw in revenue.

There’s one other thing that is real big. In all of the plants, back when – prior to the great run-up and everything, as Paul had mentioned earlier, no one has the amount of capacity, let alone the various SKUs, we make. Well, when you get into a situation where you’re really large in the OE side, what happens is when it starts to turn down, your original equipment people do not turn around, and they start hitting their inventory. So where they used to carry a couple of weeks of inventory, they whittle that down. So it’s like a few, couple days. Well, what happens is they – in our business, they miss. They don’t have any super-wonder-way to guess the market is going to order. So you’re getting these calls: we’ve got to have XYZ, not ABC. So what was happening is our plants were not – they were jumping to react to that. Well, in the previous, when things are going the other way, you turn around, and you only – we had a system where we ran a schedule; we had a little inventory; but we also – in the wheel business, if for some reason you switched and you wanted wheels, we have ability to do it in 24 hours, but we – necessarily, we have a set-up charge. Because the only way you can make money in that business as if you have a line set, and you run the parts, and your pricing is off of that. Well, it’s the same in the tire business, only the tire guys had never done it. So we have calls. People have been constantly taking from the wheel, and going over to the tires, and putting tires in a family tire. Like, there might be 10 different part numbers to make a 29-5-25 tire. Well, you can figure out which one, you set it up, then you run. And all you have to do is add something to catch the next one. Add something more to catch the next one, and that gives you volume. You’re not changing everything. And that cuts your costs down. And we are doing that. And we are going to continue that process, and it will be another year before we ring it out in the tire business, so that you can bring your margins up.

Thank you. But Morry, kind of a little different twist, just going off in a little different direction: can you update us on kind of the LSW penetration? I think on the last call, you guys had said something about kind of a mid-single-digit overall penetration. So 5% maybe in tires being sold or LSW. And I think you said someplace in the 10% to 15% of the OE equipment was shipping with LSW. Is that correct? And how –?

I don’t know the percentages, because I don’t really look at it. I’m out at the – as you know, I go out and I have our test farms all around. And we have started in Brazil. The U.S. side – when I was up to Saskatchewan, a farmer bought a brand new 9620, and he has the 1250s on, but because he’s doing some other side-hill stuff – and Saskatchewan is pretty flat, but what it is they go down by these – I call them creeks; they probably call them a stream or a river – and he is farming that area. So he actually sent the pictures to us, and he stuck a set of 800 46 LSWs on the outside of the 1250s. And his son always wanted to try to have a track, so he bought him – this is a very successful, big farmer – a new four-track from Deere, which is a 9620, whatever they come on, to him. And he runs circles around it, even going up and down that slope. The old man drives the tired one. And in the future, I think that’s pretty much all he goes. So the problem we have is eventually – and I explained it to him, and that’s why we are on a big push to come up with a – I call it a hub or a center casting that can take all the weight, whether it’s John Deere or whether it’s CNH. And we’ve got to get that out there. And we hope to have it in the next 90 days, because the little teeny sleeve that’s inside of there is going to break. And if it breaks, they’re actually going to take a big chance of screwing up the axle. And our engineers, talking with Deere, talking with our friends at CNH – the hubs they have, they’ve never had the tires. This only approved – the 800 by 46 is the biggest one approved on the tractor side. We’ve got them also approved on the smaller ones. But for big – if you really wish to own the market, you have to come up with the proper – we have what you call a double sleeve on each side. And that’s what makes the thing go. So I expect the LSW to continue to have a steady climb.

Morry, when you mention the double sleeve on each side, are you saying on both outside the vehicle, or a sleeve on each side of each wheel?

The sleeve is – you have a center casting. All the castings you see today, from the outside there’s one sleeve. And what you have to do, we have a double sleeve. And it’s for heavy, heavy operations. And it’s the old, staggered 20 bolt. And you have to have that. You tighten the sleeve on the inside first, and then you tighten the one on the outside. And you need the double sleeves, because what you’re doing – it’s like having a twin hub, but it’s one. So they’re –.

Is that so you don’t overweight the LSW too heavily on one side?

No, it’s because what happens is that you have to have that hub have a bigger area of the axle, or you’ll sheer that center sleeve. Like, if you look at John Deere, John Deere sells a 9000 scraper application. But if you put a big wheel there, they have one option where you have to have a double disc. You put two hubs on, you bolt it to one – they’re called tier casting. And then what you do is you bolt this other disc in, and you put a sleeve on, and then bolt it up. And that’s just a super mess. And that’s why Case has captured that in a – most of that market with their quad, whereas we can take any four-wheel-drive product, and we put our double-sleeve hub on it, put a big super-single LSW, we’ll run circles around any of the tracks. But the problem is when you get past the 500 horsepower, you’re in – it’s just a matter of what time that little teeny sleeve in there, which is a wedge – they call it a wedge; I call it a sleeve – that wedge is going to break. And then if you take an axle, then everybody looks at us. So we’ve – we’re going to make sure that when we sell them, we sell the whole thing. There’s farmers who are buying 1250s and slapping them on 8000 series tractors, and they just want that traction. But the – also, they want the flotation. And you know, that’s way too much tire for just pulling. So it’s basically floating. Armor is used in duals, it’s used for flotation and traction. Now we’ve given them a single tire, they don’t need duals.

All right, thank you guys.

Thank you.

Our next question comes from Larry De Maria of William Blair. Please go ahead.

Morry, as it relates to the ITM sales, obviously you already had a bid which spurs the special committee. Just curious, is that bid still good? And have any other bids emerged with this business yet?

At this junction, that special committee, I know that they – whatever the bankers do, like Goldman, they put out a book. And I know they have – they are having a – they’re sorting through whatever it is, first process; then go second process. So I’m not involved in it, Larry, but as I said in the press release and I said earlier, I believe that they will have this thing wrapped up before the end of the year. And that means it goes to the Board. And the Board, if it’s at the number that they think is fair for our shareholders and what they think, then it will proceed. If it isn’t, then – you know, right now North America is on pace, like I said. And that’s from our oilsands. And we’re – that’s a bright spot, even with oil going down. The word is under $20 is the cost to produce a barrel of oil up there. So we have finally broken in. It’s been like a six-year banging at the wall. Finally, we kind of had the Trojan horse over there and blew the sucker up. So we got inside.

Okay, I didn’t realize the cost of production was so low up there.

Yes. They – you’ve got to remember, it’s – the oil companies, they throw billions and billions. And now, when it – they didn’t care. Then when it went down, you know, if you even look at our friends at Suncor, look at their numbers. They are doing okay in there. They’ve got a guy running that place now – I haven’t ever met him, but I’ve seen some clips of his speeches. He’s snapping the whip. They are pruning their costs down. In fact, he’s the one who basically said that as long as oil is above $20 a barrel, they should maintain a profit.

Okay, switching gears a little bit, Morry, your thoughts on the competitive environment in Brazil? I think Michelin is going to open up a factory down there. As it relates to your wheel lines that are going in, do you already have OE contracts down there?

Well, we’ve got enough OEs coming to us. And we’re not worried about the business. The biggest thing for us in looking at Brazil is the situation of the LSW and making sure we can produce the wheels there and making sure we produce the tire. Because the duties are what kill you. I don’t really look at – Michelin is a great company, and God bless them, but they’re going to have a tough road down there. They wish to do that to be able to give to their dealers. What happens – here’s the tire, blah, blah, blah. Well, Michelin, everything is European. I think that’s what some people in the U.S. forget. The European influence in farming has gotten stronger the last 15 years in the U.S., but the U.S. does not farm like Europe. Europe’s tractors have got to operate like a pickup down the highway. Everything is snapped on. No OE has ever sold a dual in Europe. Ask them in the U.S. – oh, yes, yes, yes, it’s got to be duals. And the axles are short, so they have snap-on duals. Go to South America. The leading guys down there – that’s all the European design. Those farms are 10 times the size of the biggest farms in the U.S., Larry. If we get 200 farms, think about that. 200 farms in South America, and we won’t be able to produce enough product. And it will all be LSW, the wheel and the tire. And they’re not going to leave you. That’s what’s – y7k that’s what I’m looking to do.

That sounds good. So aside from the penetration of LSW, are you seeing any positive signs in the Brazilian market per se? Signs of a turn, a bottom, et cetera?

The funny thing that I see in Europe – I mean in South America is that their biggest problem is trying to get their crop to the market. I’ve been out there to these places, and a lot of times we fly right in and land at the farm. And then you look at the roads – it’s nuts. Now, you have the sugarcane. And the sugarcane boys, they just switch from sugar to ethanol, which everyone is paying the – they can make the biggest buck. When you turn around and you go to corn and soybeans, the corn – of course, they get one-year crop; but soybeans, they get two. And the equipment is not made like in the U.S.. So when you go down there, you find out that there’s more spacing between their rows. Because when they get in, they can only go about 3 miles an hour. So you know how long – and sometimes, if it’s rained, they can’t even get into the field, because their tires are 75% filled with water, trying to get the weight. It’s – I know I’ve got gray hair and a little long, but man, I’m treated like Moses just come down from the mountain down there. And hey, they got the money. There’s a few of them – I’ve seen articles all, they were worried about their cash and that. Well, they are paying everything in reals, and the real has dropped. So they are doing pretty good down there. The only problem is how much they lose going to the ports.

Okay. Thanks, Morry.

Thank you.

Our next question comes from David Tamberrino from Goldman Sachs. Please go ahead.

Hi, thank you. Good morning. Just one question for Paul. Wondering what your working capital outlook and needs are going to be for the second half of the year? Obviously been doing a very good job in the first half-year, but with the buildout of tires in Europe, probably need some inventory. Wondering what you’re thinking about that for, again, working capital in 2H 2016?

Yes, we’ve set an internal target for us to basically end the year with a cash balance right around where we started the year. So that $200 million level. We are increasing strategic inventory where needed. As you noted, there would be some European inventory that would need to be on hand for that market. I just think it will be a gradual buildup over there. We are also taking a look at some of the low-running inventory that we have on hand and trying to trim that to balance the quality inventory that we’re putting in and some of the, as we call it, cats and dogs out there and take those off the balance sheet. So again, I think our internal goal and where we are forecasting ourselves is to be right back around that $200 million level where we started the year.

Okay. Thank you, that’s very helpful. And then just with the looming liquidity needed for the convertible debt, do you feel like you’ll be able to satiate that with a target of $200 million balance at the end of the year? Or do you feel as if some of the strategic actions that were potentially contemplated earlier on the call need to be put through and finalized?

We have the cash right now.

Yes, we feel very comfortable with that. Again, we’ve been a declining market for 2.5 years now. Cash is actually up, continues to be up from those beginning levels. We have the cash to handle the $60 million maturity. We’re very comfortable about where that position is for 2017 to be able to continue to make all the necessary investments, see absolutely no concern with that. And the strategic actions are unrelated to the needs of taking care of that convert. We can do that with cash on hand.

And then, with the start up of TTRC, we – when you look per month, you’re going to – at full bore, you’re going to be between 600 and 700 tires. They pay us to take the tires. So the tires will be built the day they hit our site. And then we just start cranking them. And then what we get out of them, you turn around and you sell the oil. One of the best news, that up there, is if you read about the $15 billion the Chinese sunk in up there and then actually decided to go home – well, in that refinery of theirs, they produced a, call it, like a kerosene or something. I forget the word they used to do it. And they mix that all to put their oil on the pipeline. When they get done getting the oil sand, running it through the cokers, they get this real heavy slurry. So to lighten it up, they put – from them, who process that, you put it in the pipeline, and then they ship it down to the refineries. And so they – what they use just runs right through and continues in the process, whether you’re going to make gasoline, kerosene, or whatever – plastics. Well, the oil – we get a light and a heavy. You mix the two of them now together, and you’re basically what they had. So we struck it – a little bit of luck with the announcement they’re going down. And so everybody’s scrambling, wanting that oil. So it’s bringing our price up. We have samples in, trying to get the official biofuel mark, because that just shoots it through the ceiling. And then, of course, the carbon black. We have – that’s going to run probably $0.20 a pound. So all that cash, that becomes cash coming in from the end of this month through the end of the year. So cash generators is there, and we spend a lot of time getting money out. So we are – liquidity wise, we’re really pretty good. And once everyone sees what happens, reference whether we sell the Brownsville facility, if you sell off ITM, and God help if we moved off TTRC. You know, you’re not talking a little bit of cash. We’ll have more cash than what our market cap is worth. And that’s a danger sign for people wanting to buy your fanny. So we’ll pay off some stuff and do some other things. So liquidity is not a problem.

Appreciate it. Thank you.

All right, thank you.

Our next question comes from Alex Blanton of Clear Harbor Management. Please go ahead.

It’s Alex Blanton. I wanted to ask about the – what you mentioned at the beginning, which was that the TTRC, the delay caused by the fires in Fort McMurray and the permitting, was a drag on the earnings. How much was that? What did that cost you in terms of earnings as opposed to not being there at all – I am not saying there was a shortfall in sales, no. I just want to know how much it hurt you.

Well, it hurt, but yet – you see, what happened was we were trying to get off April 1. That’s what – when you look back last year, that was our kickoff date. And that’s what we just held right to and went cranking. What happened is the permitting – we end up – you have to have a fire permit. And so when you get into the regulation up there, you have approximately 500 pages, Alex, so then – of what? And what they wanted us to do was to put in a water system. And, you know, I’m dealing in Canada now. So in the meeting we went to with the super-people, I call them, and their 500-page manual of what the inspector wanted, I says, you know, in the sixth grade we were all told that you don’t put water on a grease fire or on oil. You use foam, and you do the same with tires. And so since we’re in the tire business, in our tire plants we have foam. And if you go to the airport, you turn around and you foam the plane. So it was – and then we had that, and so instead of not having to do everything else, I bought the used fire truck, and –.

I understand all this; can I interrupt, Morry?

Shoot.

Here’s my question: in the earnings release…

We got insurance for interruption – okay.

In the earnings release says TTRC will be filing a business interruption insurance claim which could offset a portion of the cost associated with the delays. How much were those costs, and were they in the quarterly earnings?

Oh, I never looked at it. I know that the claim is going to be in excess of $1 million, okay? I don’t even put anything in there, Alex, because, you know, it’s an insurance company. I’m fighting them.

Maybe Paul can tell me how much the earnings were reduced by the costs associated with the delays, if at all?

Well, I think if we would have gotten things up and started in April, clearly there was a positive benefit to meeting that date. You know, we have talked before previously (multiple speakers).

Oh, yes. You didn’t have the sales and the earnings, but it says there were costs associated with the delays. If you hadn’t been in that business at all, what would the difference be?

I mean, from a cost standpoint, that was – there was a loss, revenue lost income stream. But from a cost standpoint, the fires – we had a little bit of displacement costs, as you had to shuttle your employees around, make sure they’re safe. Get them out of harm’s way. You’re continuing to pay all your fixed costs on something that’s not operating, as they are tending to personal matters. But that is fairly minimal to the grand scheme of what Morry is talking about.

Okay. Revenue – I see where Alex is going. Revenue, Alex, would have been between $2.7 million and $3 million. That’s what you’re looking at per month. That gives you the 36 to 40. That’s Canadian, so whatever the exchange rate, you have to back off of that. If you’re running a 50% EBITDA, you take that. And then after that, there’s a few things that hit it. But you are looking probably – on an insurance claim, you’re going to be able to – and it goes from May. So it’s May and June. You’ll get a portion of July, and that’s what you’ll get. So when the claim is finally adjudicated, how and what will count, and what they’ll pay you for, and this and that, you know, you might have $1.5 million. The revenue stream, as you just asked: you could go May, June, July, so revenue would probably have been up anywheres to CAD8 million to CAD9 million.

Okay, thank you. Second question is: you mentioned the peak sales for Goodyear in Europe were about $300 million in the ag market. What was that share? What’s the total size of the market at that time? What market share was that?

That was, like, about 20 – I want to say Goodyear at that time was probably 26%.

They had 26% of the market at the peak?

I would say pretty – 26%, 28%. I don’t think they ever hit 30%.

Okay. Thirdly, rubber prices: that’s a big factor in your tire margins. What’s happening with those?

We did we see this last quarter?

Rubber, Alex, like most commodities at this point, are kind of bouncing around at pretty low levels. What we are looking at doing is how we can take costs out of our supply chain, how we can source better, and also how we can take material out of our products. So at this point I don’t think we are forecasting any big swings within the rubber market that would have a significant impact on us one way or the other.

What would it take, though, to drive those prices back up to where they were before?

I think you’re looking at demand. I’m pulling up a chart right now as we speak. Last year this time we were around $0.75 a pound. And now we find ourself – we dipped up from the bottom a little bit here in the quarter; we are around mid $0.60s, low $0.60s. I just think right now there’s just not the demand out there. There’s still a substantial amount of supply.

Two things happened, Alex. We used a tremendous amount of natural rubber. If the price of oil drops, palm oil drops also. And so does the planting of palm trees. So what happens is that then they switch to rubber, and then the price of rubber will come down. Oil affects – the price of oil affects the price of natural rubber. The higher oil goes, the natural rubber will go up. If oil goes down, natural rubber goes down.

Okay, thank you.

You’re welcome.

Finally, one more question. When the sales do start picking up substantially, what’s going to happen to your SG&A? Can that stay relatively flat?

That’ll stay flat. That’s why I went through – when you have wheels, you don’t need a big sales force, because 85% is only – when you turn around – and that same sales force takes care of tires at the OE level. It’s only on the aftermarket do you put bodies to. And if the volume cranks up, everybody in the aftermarket knows who and where you’re at. So it should – percentage-wise, should drop…

Yes, we’d be able to leverage really well on the way up, Alex. I mean, only thing you’re talking about is paying a little bit more salesmen bonus, which is a good thing.

Okay. That looks good. Thank you.

Our next question comes from Kirk Ludtke of Cowen. Please go ahead.

Good morning, everyone.

Good morning.

Morry, at the beginning of the call, you mentioned that bookings were up. And I was hoping maybe you could quantify that. And are we at the point where you can predict that second-half sales will be up?

That prediction I don’t know. Paul and I were up at – I was in Bryan, then flew through – go through the Freeport. We were sitting there with the plant managers, and Bryan is going to 10 hours. They are running ten hours shift. And out through September, they’ve got to do – they’ve got a hump, okay? And they are coming up. When we got to Freeport, the manager, every factory has birthday meetings. Whose ever birthday, they come in and they get the questions. So you closed on Labor Day, but generally, like in our wheel business, that week after, we’ll just close it down, because we’ll have the inventory. There will be a few people to ship stuff. But you can – if an emergency comes, you’ve got enough people to slap in a few wheels. But on the tire side, and Paul can correct me if I’m wrong, but Bryan is not shutting down, and neither is Freeport. And I don’t believe Des Moines is.

No, no. We – you know, you’ve got your normal seasonal period, where you have – you do your maintenance in late June or early July. Because of the OEM volume, we are taking just one extra week on the wheel plant over Labor Day. But other than that, we are having our normal production runs scheduled for the second half of the year.

So – and most of that is being driven by two things, as I said earlier. It’s being driven by the 100-and-under horsepower and our aftermarket sales of tires.

Right. Is this – is the aftermarket a leading indicator for the OE market?

I don’t believe so. I’m being honest. I’ve been with equipment dealers every week. Dan Wall in Iowa was just named a number-one dealer for – or the elected, or whatever – for the year. And he’s a John Deere dealership, and he runs Iowa selling to Kansas. But he has five states for the turf, reference the golfing item. And he’s had a fairly decent year. He’s a little more creative than maybe some, but he’s been hustling. And he’s moved a lot of used equipment. He bought – it was either two or four more dealerships, and he went in on the used equipment and auctioned it right off. You look at some other dealers, and the used equipment – they have to take a hit. And some of them are much more aggressive in how they do it than others. So the dealer just sold $2 million worth to the Philippines, all right? Getting it all ready. Then he sell – actually, that same dealer is working on another off-site. Weird. It’s the dealer and how good the dealers are in it, and they are bringing down their costs. And now, when – let’s go to a big farmer. Big farmers are present probably close to 50% of all big iron on new sales. Well, for a long time they would be able to buy a brand new piece, trade it in a year later, and get almost what they paid for it. So that’s like farming with equipment for free. Well, that has really stopped. So if they are going to farm on 8000 or 9000 series tractors, then they might decide that, well, I’m going to keep my equipment for three years, and then I’ll trade. I’ll trade a third each year. So that means we are going to go back to see different type numbers. And that’s why I said earlier, I don’t see any magical booming up at the top. I think it’ll be strictly a gradual uptake. I do not think you going to see – you’ll see a 4% or 5% increase. It might go two years, and then it might stay flat. Then it might drop a couple of percent. Then it’ll go up 5% or 3%. That’s the kind of graph I think we’re going to see for the next 10 years.

That’s helpful. And then, with respect to the cost savings – and you mentioned that it’s a lot of small savings, and there aren’t any big chunks on the horizon, do you have a margin target? When you look at your peers and do best practices and look at benchmarking, do you have a –?

Well, there’s – when you say looking at your peers, number one, there’s no peer in the world that is like us, because we only make farm, OTR, and construction. And we make the wheels with them. And there’s no one in the world that does that. Not a Michelin, not a Bridgestone. And then you’re left – let’s take our friends at Trelleborg. Trelleborg makes a few wheels, but most of the wheels they make are solid. They make a lot of margin on their solid tires. The reason they bought Mitas is because they make all this other stuff that we’re looking at now, using our big facility in Union City, to go after some of that business, which is, you know, these bladders they use in sewage – we have an infrastructure project. Those contractors just blow those things up. That’s where you put sewer pipe, and you’ve got water. You don’t want water; then you put these bladders in it. And then you send down, and they connect, and then they pull it out. Well, that just rips them. But in the U.S., you’re laying pipe. So the margins on those are 40%, 50%. Mitas made all the special bicycle tires. So that – for Europe, that was their big thing. I mean – and margin is really, really good. So when they started buying up all the small guys that used to be in the Houston block, they become a big competitor to Trelleborg. It was 50% of their business. That’s why Trelleborg bought them. So now they’ve got that market in Europe. The only unique thing about our Russian plant – we can make all that, too. We’re going to make tubes for every LSW tire. Because when you go on hillside, over out in the Western part of this country, you’ve got – those tractors and combines, you cannot have a tire go flat. Sod will come rolling down the hill. So we’re going to do it just like you do log scooters that run around hitting tree stumps and everything else. We’re going to put a tube in it. And we’re going to make it so the rims have bead humps, where a bead can’t move. And it’s a safety feature. But when you get over there and show it to the farmer, hey, that’s what they want. So we’re going to send it from Russia with love. Okay?

Got it. Thank you very much.

Thank you.

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

We just want to say thank you all that listened. Come out and see us. And whatever you do, vote. You want to watch my tweeters you’ll know how I’m going to vote. But I’m an old guy, so you’re going to have to live with the results more than I will. But have a great, great weekend, and thank you all. Bye.

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