Good morning, ladies and gentlemen, and welcome to the Titan International Incorporated Third Quarter 2018 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Todd Shoot, Treasurer and Vice President of Investor Relations for Titan. Mr. Shoot, the floor is yours.

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

Thanks, Todd. Good morning, and we appreciate your time in joining us today. As Todd mentioned, I’ll start off by talking about some highlights for the business and turn it over to David. And then, we will provide some information on the Russian put option before concluding by taking your questions. So, let’s jump into the business as Titan had another good quarter of sales growth. This was our seventh consecutive and was led by our earthmoving/construction segment that was up over 15%. Our revenue growth was solid this quarter at 4% but was hampered by currency fluctuations that absent that impact would put our growth around 10%, which would have put us north of $400 million versus the reported $385 million. However, we did a good job this quarter, leveraging that revenue growth as we produced 26% incremental gross margins that drove our adjusted EBITDA up by over 35% this period. This puts our year-to-date adjusted EBITDA at $104 million, which is more than double where we finished all of 2016 and doubled year-to-date 2017 levels. This quarter, our continuing efforts to drive revenue gain through to the margin improvements and then on to the bottom line, resulted in us reporting an adjusted net income of $0.04 per share that compares to a loss last year of $0.09 a share. That’s nice improvement year-over-year, and I should add it’s our first profitable third quarter since 2013. It’s important to keep in mind that the only net income adjustment is related to the Russian put option, which is primarily for interest and currency fluctuation. Put adjustments was $4 million for Q3 and $11 million for 2018 altogether. I will talk more about the put option later, as I noted. And keep in mind, the put option does expire in January…

Thanks, Paul, and good morning to everyone on the call. Let’s get straight into the numbers for our third quarter and then the performance. I’ll also discuss a few things that we’re focusing on as we get closer to 2019. I’ll start with net sales. Net sales for the third quarter of 2018 were $385 million, this was up 4% or almost $14 million from a year ago. This is the seventh consecutive quarter with year-over-year increases, as Paul said earlier. On constant currency basis, revenues would have been up 10% or roughly $22 million in the quarter which would have been $407 million in total sales. For Q3, net sales were higher in our earthmoving and construction segment while ag and consumer segments were lower when compared to the same quarter last year. Net sales on a trailing 12-month basis has claimed to $1.62 billion, which represents a 15% increase on a comparable basis from a year ago. Moving on to our gross profit and margin performance. Reported gross profit in the third quarter was $44 million, or 11.4% of net sales, compared to $40 million or 10.8% of net sales in the same quarter a year ago. This increase represents a 9% improvement in gross profit versus last year. The increase in gross profit in dollars was driven by increased sales volume, partially offset by material costs as we talked about a lot this year. The impact from negative currency translation effects on gross profit was approximately $2.9 million for the quarter or 6%. Our overall gross margin improvement was primarily result of the production efficiencies we’ve been able to drive with increased volume, offset somewhat by the increased raw material costs. While we were able to pass through the higher material costs in many ways, our overall…

Great. Thanks, David. Just a few notes regarding the put options relating to our Russian tire business, Voltyre-Prom. As we stated on our earnings call last quarter and in the form 10-Q for last quarter, we are now within the six-month window that started on July 9th where either or both of our partners in our Russian joint venture could exercise the put option. A copy of the shareholders’ agreement which includes this put option was filed along with our form 10-Q for this recent quarter and is publicly available. As we previously disclosed, the put options were exercised by both of our partners in the Russian joint venture. Our total obligation would be approximately $120 million, which Titan would have the option of settling in either cash or freely tradable Titan common stock. The closing of the put option would be required to occur within 60 days’ notice of the put or when all necessary regulatory approvals are obtained, if later. Under the shareholders’ agreement, if necessary regulatory approvals are not obtained within 120 days of our receipt of a put notice or prior to that applicable regulatory authority refuses to grant us approval, then our obligation to purchase the interest in Voltyre-Prom from such partner would cease and they would retain their current equity ownership in the joint venture. It’s important to note that one of the partners of the Russian Development Investment Fund managed by their CEO, Kirill Dmitriev, is on a sectorial sanctions list. And should our Board decide to satisfy the put and stock, there are regulatory approvals that we believe will have to be received by RDIF. If RDIF was not to receive proper regulatory approval, then we believe that discussions would take place on other alternative solutions. Over recent months, we’ve had some discussions with our partners in the Russian joint venture regarding their plans with respect to their investment in Voltyre-Prom and the put option. These discussions are ongoing. And as of today, we’ve not received a formal notice from either partner regarding their exercise of the put option. Our Board and I together with our financial advisors are closely monitoring these matters and will deal with these issues as they develop. And our Board will work toward making the best decision in the interest of our shareholders. We continue to believe in the strength of the Voltyre-Prom management team and the prospects of a successful future. With that, we will be glad to answer any questions you have on the financials or other business matters. And I’d like to now turn the call back over to Cole to begin that process.

[Operator Instructions] And our first question comes from Joe Mondillo of Sidoti and Company. Please go ahead you’re your question.

Just wanted to clarify one of your last comments there, Paul, on the Russian put. The 120 days’ notice. Could you just clarify what exactly that is? Was that at the end of the exercisable period, they get a 120-day notice, or could you just clear that up? I wasn’t…

It’s a 120 days from the receipt of the put notice.

So, they choose to put it or you’re -- in other words, they choose to exercise it and then within 120 days, they have -- you have to resolve finances. Is that…

The regulatory approval -- that’s correct. So, as of today, we’ve not received the notice regarding exercise of the put option from either of the partners. So, that 120-day period has not started yet. But, as noted in agreement that was filed with the 10-Q, there is 120-day period that would start upon receipt of the put notice for us and then to obtain the proper regulatory approvals.

Okay. And I know there’s not a lot more you probably can say here. There’s a lot of different scenarios that could happen in terms of how much is exercised and who exercises what and how you finance it. But, number one, could you tell us if there is a possibility or if there’s any possibility that the $120 million, you won’t fully be obligated? In other words, one or both may not choose to exercise it. And then, also is there any other sort of color you can provide on sort of how you’re thinking about financing, if and when.

It’s a good question, Joe. But, given where we’re at in this process, we’re just not a in a position to say more than what we previously disclosed and discussed already. We plan on providing updates and certainly we will do that as further disclosure as appropriate. But, unfortunately, at this time, we just can’t say anything further.

Okay, understand. So, I wanted to ask about sort of the tariffs, gross margins, pricing. You saw about on 2% to 4%, call it, price mix benefit in the first half. You saw 4% benefit in the third quarter here in terms of price mix. And the price increase of 4%, it was not initiated until September 1st. So, I am just curious sort of going forward, looking at the fourth quarter, maybe even into the first quarter, it seems like the sort of price mix benefit is going to accelerate to maybe 5% or beyond. Could you just -- is that a pretty fair statement? And sort of how are you looking at gross margins, considering -- because they were better than I expected, considering the headwinds that you had?

Let me take that from a business perspective, then I’ll let David or Todd talk a little bit more on the financial side of it. From the business perspective, it has been volatile, but I feel good about what we’ve been able to accomplish this quarter. As you noted, with the progress on our incremental margins, there are a lot of moving pieces with commodity prices, both on the input side and the market side of it. I feel like we’re in a good spot with it now. It’s hard to comment where we think it’s going to be, the early part of next year. But, one thing I am very confident that we’re doing well in North America is that the project we talked about with 80-20 because as we go through that we are analyzing everything about the business of how we price, what our costs are running through the operational side of the business, looking at our products, make sure we’re producing the right products, have the right inventory levels on hand. So, we’re really spending a lot of dedicated resource to make sure we get this right, as close to right as we possibly can, but understanding that those pieces are going to constantly change. So, culturally what David and I are driving through the organization along with Lester Brewer and Steve Hathaway, our divisional leaders, is that this has to become part of our culture. We have to be constantly looking at these drivers that impact our business and making decisions quickly and rapidly to adjust. And so, when we talk about this 80-20, it’s not a one-time process where we -- we put on the shelf and we feel good about what we accomplish. It’s doing what you’re getting into Joe, which is just staying on top of it and try to maximize as much as we possibly can on the elements that go into our gross margin. So, from a business standpoint, that’s how I see it, David and Todd, if you want to add something on the financial side.

I think, you technically hit everything that’s required here. We are seeing in a combination of price and mix some of our products large versus small ag and things like that. So, I think -- Joe, I think it certainly could be accelerating to a certain extent with various price increases. But there’s a lot of moving parts to it. So, I am not sure how to get it specifically quantified for you.

I guess, one thing that I’m sort of curious of, the price increase didn’t go in place until September 1st. So, the first two months of the quarter, you didn’t benefit from the price increase. And so, I’m just curious, given what you’re seeing with raw materials -- and I know natural rubber has continued to come down. I’m not sure if synthetic rubber has sort of stabilized. But natural rubber continues to come down, synthetic maybe stabilizes. You get -- the price increase just went in the last month of the quarter. It seems to me that the fourth quarter is setting up pretty nicely and I am just -- I know there is maybe some other pieces in there. But, I’m just wondering what your thoughts are on sort of that thinking?

Certainly, it is a piece of our overall global business as well. We’re talking about that price increases, really specifically North America for tire. And certainly that’s been very obviously selective based on where our customers are at, as well. So, certainly, your intuition is correct. But again, there’s a lot of moving parts. You have our various price mechanisms within our international business that are also -- gets in a favorable position as well. So, yes, we are setting up, but obviously this is a seasonal low quarter in the year for sales. So, it -- really the bigger benefit would be more likely Q1.

And I just wanted to ask about the growth that you saw in the ag segment, specifically the volume. Volume was under 2% growth, slowest than several quarters. Just wondering, sort of what you’re seeing there geographically, how you’re thinking about growth going forward? Do we anticipate sort of some of -- this kind of really low single digit type growth going forward? Or maybe a reacceleration, Or just wondering what your thoughts are on that?

Yes. We are looking to put our thoughts together for 2019. And the early indications are your growth is going to still be moderate levels. We haven’t quite pinpointed exactly how to find that moderate. But, I do believe it will be above the 2% we saw this quarter. What we saw this quarter -- what David was talking about, it’s the mix. Whether you are talking about small versus large, aftermarket versus OEM, you see different results. Latin America is a little bit different than North America right now. But, I would say the indications that are positive though, Joe, are OEMs are still looking for next year to be a good year. Nobody is using the word great. You are not seeing that rampant growth expectations for next year. But, you are seeing some good solid levels of expectation for growth continuing for next year. What we saw this year is the mix on the aftermarket this -- I’m sorry, this quarter, not this year. This quarter, we saw the aftermarket pull back some with what’s going on with commodity prices concerns, a little bit of challenges out there in the field with the weather conditions. And so. I think the mix this quarter where we saw that growth rate come down was more towards the aftermarket in North America. Don’t anticipate that being a trend that will continue in the future because there’s just a strong level of replacement demand that pent up. We had some really good LSW sales in the tail end of this quarter. We’re talking about our strategy for next year and what we can do with that to make sure we’re capturing everything we possibly can. If you go around the Midwest these days, it’s extremely wet. And it fits really, really well into our sweet spot with our LSW products. So, I think this quarter, yes, you’re right. The level of growth was on the low side. But, again, I think if you look at the mix part of it, there is definitely some positive aspects. And again, the trends and the expectations for next year I think get us back into that moderate range. And certainly we’ll be pinpointing that definition of moderate as we move forward with our plans for 2019 and share that with you guys. But, I think next year will still be a good growth year.

Yes. Not surprisingly here a little bit of weakness in North America, especially with the tariffs and everything that that caused. Outside of North America, it sounds like North America certainly was a little bit of the cause to the slowdown. Outside of North America though, any sort of shift in growth rates or change in activity that you’re seeing?

As David mentioned, Brazil got impacted by currency translation, but their concerns with their political environment and the weakness they’ve had in their economy has made the sugarcane market a little more challenging down there for our undercarriage business. So it’s not performing at the levels, I think, we expected at the beginning of the year. But again, we talked about ag, there’s not anything that’s performing at a really negative level. I think disappointing from the standpoint we thought there’ll be really good growth, whereas as you mentioned, the growth rate was more like 2%. So nothing’s really falling off the cliff. But South America, Brazil specifically, has definitely been a challenging market. I think it’s in my comments when I was trying to point out that our team has done a lot of things to react. But part of it is really focusing on the cost side of the business knowing that the revenue side is going to be challenging, protecting your market share, waiting for that moment where the market bounces back as what Brazil seems to do when it goes down, it never seems to say down too long in these types of situations and has a tendency to bounce back up. So again, I don’t think the Brazil trends we’re seeing this quarter are indicative of what it’s going to be like for the rest of this year going into next year.

Okay. And last question for me and I’ll let someone have a chance. On the product mix, just wondering, I know this has been sort of a status quo or things hadn’t been changing a ton with product mix. But how -- when do you think some demand for the heavier, larger type of equipment comes back? Do you see any change in the product mix as we head into 2019?

I would say, I’m definitely hopeful about that. The large dealers I’ve been talking to recently, they’re seeing some good movement in their inventory. But they’ve done a good job of preparing for that. So it really becomes almost specific down to the dealer to get an answer to that question. Good strong leaders are moving large ag. Some of your weaker dealers that are sitting on inventory levels are trying to get a price for that used inventory are having more of a challenging time with doing that. Yes, I think the short term answer to that is, you’re going to see some movement because there’s just a pent-up situation there or just an underlying replacement demand there that’ll keep things moving at a healthy level. Something obviously we all watch closely is the inventory levels out there in the channels. And those are at good moderate levels. There’s not anything that’s really shifted significantly here lately. But again, when you talk to some of the big dealers specifically, they are moving big products. I think the answer for 2019, where it gets tough to get that visibility, though, it just -- it depends on where commodity prices are. If you read the recent fed district reports, I mean, you see some activity out there with loans that instead of going into equipment is going into supporting operations. And so you just don’t know where exactly things are going to be come March of next year on commodity prices. I think we’re all hopeful that some of the nonsense from the tariffs and the concerns and the pullback that we’ve seen will start to add and you’ll get the big market moving again. It’s still below 30-year trends as we’ve all discussed before. So there’s room for it to definitely get better without really any -- you don’t need something dramatic to drive that change. When you’re consistently blowing your normal trend lines, if you could just get back up to normal, I think it’ll be a really nice growth rate for large ag. And I don’t think it’s going to take too much to get there. But it’s -- it is going to take commodity prices staying at a higher level -- higher sustainable level than where they’re at today.

And next question comes from Chirag Patel from Jefferies. Please go ahead with your question.

So, I just wanted to talk a little bit about the ITM business for a few minutes. Just trying to get a better sense for, one, would that level of growth kind of contributed to the overall company? And then just where specifically you’re seeing that growth coming from. And I’m really looking into the idea of how -- what the sustainability of that kind of growth is as we move into 2019, 2020 and beyond. How big is that business? And how much further can we grow really?

Yes. Again, I’ll answer from business side. Some of the specific questions in ITM, we don’t disclose at that level. So I’ll let Dave and Todd jump in on that. But from the business side, where we’re seeing ITM grow, has grown well in the European sector. There’s a lot of construction activity, road building has been good. We’re seeing the Far East perform extremely well. Again, as mentioned on the previous question, about the only softer spot with undercarriage would be Brazil, where it’s primarily driven by sugarcane. If you look at our ITM business, it’s 90% earthmoving/construction, roughly 10% ag. Is the growth sustainable? What the viewpoint we’re collecting right now is that it is. There’s enough visibility. Not just in our undercarriage business, but -- excuse me, also our wheel and our tire business, what we’re seeing is that there is good visibility and good demand going into 2019. So certainly, for today, I probably can’t comment on 2020, but I can say that we feel good about where the growth is for 2019 in relation to ITM. Then, David, I don’t know if there’s anything you want to add. Some of the specific questions on what we disclosed with ITM, I made some general comments about percents and growth, but we really -- we fold that after our earthmoving/construction segments. So I don’t think there’s too much that we can add on that.

I agree with you.

And then, if we can just move a little bit to the ag side of the business for a few minutes as well. Just -- we talked about the sales of volumes just being down a little bit here in Europe. How are the sales overall in the North American business? I know that the mix was a little bit of a driver, but just purely on pure volume itself, the overall decline was about 2%. So just trying to get a better sense for that aspect of it. And then, we talked briefly about it in the last question about the LSWs being a little bit more of a better beneficiary over the weather in recent months here, but just trying to get a sense for, one, how big of a -- is the LSW contribution currently into the ag business? And then, what kind of level of demand have you been seeing in the more recent months?

North American ag, on the OEM side, is still performing very well. It has been throughout 2018 and did again this quarter. That business is growing. We’re consistently seeing that on the wheel and the tire side. Really, the only softness in North America was with aftermarket, and again, I think that’s just because of the muddy waters right now with all the talk around tariffs and taxes and the farm aid and just a lot of noise. And so again, I don’t think there’s any underlying fundamental issues with the aftermarket performance. It definitely -- the feedback we’re getting from the customers is that it’s not. But it’s North America that was a really, I would say, where the weakness was. But our real business, which is in North America is 90% OEM, is still performing very well this period. In regards to your question on LSW, specifically I know Todd has some numbers at high-level he might have shared. But I would say from my perspective, we haven’t given up the granular detail on LSW. But what I’ve said publicly is that it’s consistently through the past few years grown double-digits. We’ve been very pleased with the performance since we really launched aggressively in the market a few years ago. We’re continuing to see those trends. David’s talked pretty extensively about working capital needs. And that’s one of our working capital needs that you’re seeing us investment in, is making sure we got the right inventory available. What we see with LSW is when customers demand it, they want it and they want it now because it’s meeting a very specific need in the marketplace, which is it’s going to make their equipment perform better in some very tough challenging conditions, which we saw a lot of this fall. So as -- from a high-level performance perspective, it continues to grow and perform right at expectations. And we will continue to invest in LSW, bring out the new models to keep pushing the pieces of the market where we’re not touching right now. And we will continue to invest in working capital. I know David is working very aggressively on working capital levels, but him and I have spoke that this is one area we got to definitely make sure that we’re investing through Q4 into Q1, so we’re ready for next year to capture as much as we can, the market.

And our next question comes with from Komal Patel from Goldman Sachs. Please go ahead with your question.

A couple of follow-up questions. One, can we talk about your market share trends in the quarter? And given the impact of tariffs, did you see stepped up competition from imports that weren’t impacted by the same higher cost? Any kind of customer switching that you noticed, maybe from the low-end farmer?

I would say, look, there’s definitely a lot of moving pieces with the tariffs. But I would say the one part of it that -- on the positive side -- look on the low-end farmer, yes. I mean, you got some people who are going to chase price, and I don’t think it’s the tariffs that are going to cause that. I think they’ve been doing that for a long time, whether it was wherever the imports were coming from. So you’re always going to have that aspect of market, but what I’ve been seeing in the market is a lot of customers are looking to de-risk their supply chain. And they’re looking to remove some of the volatility associated with, not just tariffs, but currency. Obviously, a lot of a number of OEMs, not just in the -- in our space, but just in the broader sectors, have been talking about supply chain constraints and be able to manage that on a global basis. And so I see that there’s some positive opportunities that are coming our way from the tariffs and that Titan is a one-stop shop. We can handle many of their needs across the world, across wheels, tires and undercarriage. And so we offer the ability to do something that many companies can’t do. So my discussions here over the last few months had been more on the positive side. I know my guys have the experience in that as well that people are interested in getting tight into the mix on maybe some areas where we don’t currently have the business and hearing what we can offer to them. So I see some positive things coming from the tariffs. You’re going to have, like you alluded to, you’re going to have the price shoppers, but there’s -- in a lot of products that we deal with, especially on the OEM side and even with our aftermarket customers, I mean, there’s an element of not just loyalty, but there’s element of cost that goes with just swapping and changing out inventory, changing our products, changing to a new supplier. So I don’t think you see that. It doesn’t just happen on a dime, it’s not something that just happens rapidly. So I think there’s always that portion of the market that is going after a lower-priced product that still -- still exists and it will exist. But no, we’re not seeing that jumping around, going from 1 supplier to the next just because they can save a couple of pennies because of the tariff situation.

Got it, thanks. And then, just a quick one on SG&A. I think the last time we spoke, we discussed some kind of low-hanging fruit around figuring the full financial stuff you have at each location, some other levers. What kind of operational-related improvements have you been able to unlock so far in the SG&A side?

David, let me say something. You can jump in on that. I think it’s -- there’s a lot of potential there, and we’ve passed some of it, but part of it is going to be making the investments that David talked about into our systems to really go get the rest of it. We are going live -- actually, as we sit here today with a couple of big elements of that system being rolled out to our plans and our corporate financial team in the U.S. When we get that in place, then we can really start looking at more aggressively how we approach our corporate infrastructure. I will say we are -- the way we’ve grown and the way we’re positioned now we are decentralized at our business unit level, and with the systems, it’s an investment. It’s not just a new toy. It’s an investment that will improve our ability to access information, make us more efficient, allow us to make better decisions. But in the near future as well, allow us to leverage our infrastructure better and really change how we’re set up as a company and be less decentralized down to the business unit levels. But that’s why we’re making this big investment in the Oracle cloud system that we are rolling out. We went live November 1. So David, anything you want to add on that?

Just to be clear, we’ve implemented it in our corporate financial environment over the course of this quarter and in our wheel operations here as well. And we’ll be in the midst of doing our North American tire business over the course of next 12 to 15 months. And therefore, take a little bit more time before we get fully into the cost structure, if you will, but I think the important thing is that it not only will help us from an overall SG&A management standpoint is that there is a lot of unlocked opportunity in how we run our production facilities. And obviously, that will improve production efficiency and so forth, and therefore, helping us with our margins as well. There’s a lot of benefits that are going to take place over the course of getting this implemented.

And our next question comes from Alex Blanton Clear Harbor. Please go ahead.

Could you discuss in general the effects of the tariffs on you so far? And including what’s happened to the ag market as a result of the retaliatory tariffs that have been put on and the desire of farmers in view of that uncertainty to buy new equipment. And then, what would happen should the house representative shift in the Democrats and give Congress some leverage on pulling back some of these tariffs because Congress is the one that has, according the Constitution, the tariff power. But they have delegated it to the President to several acts over the last 2 decades. And now the President’s exercising that power, but he could lose that power should Congress decide to repeal those acts and then on those tariffs could be reversed or done away with. And given the fact that there are many Republicans in Congress who also do not like the tariffs, there is a possibility that, that could happen. What would happen then to the ag market if that occurred?

It’s a good question, Alex. And I think the key component of all this with the ag market is what are you going to do with the export grains? And really, what the tariffs did -- and the steel prices and the impact of the tariffs on that has been what everybody is really focused on. But I think from the ag perspective, it’s just what do you do with the grains that need to be exported to really drive the commodity prices here in North America? And I don’t know if the answer to that question is directly related to the tariffs being repealed or not. I think the tariffs brought it into the spotlight because then everybody was focusing in on the fact that if you’re going to put tariffs on our products, then we’re going to stop taking yourgrains. But are those markets where our grains are being exported, are they able to find suitable substitutes? And what does that mean for the future? And of course, in the world of ag, the output changes so much from year to year, it’s not an easy question to answer. So yes, I think for the markets to be successful in North America, you got to find a way to export some of your large grains and that’s the key component of all this. And I think the tariffs, all it did is just -- the retaliatory tariffs were focused on the grain side of it. And if you repealed it, it’s tough. Politically, what that would mean, but I think -- go ahead, Alex. You were going to say something.

I was going to say the soybean prices had plunged because of what China did in retaliation. They aimed their retaliation at the red states, obviously, which are the farm states, a lot of them. So it’s retaliatory actions that go away because our actions are reversed. Then, when we think that the demand for the grains would come back from the people who have taken it away for the time being. And so wouldn’t that be a real positive to the ag market if that happened.

I’d just avoid making a political statement is what I’m doing.

Well this isn’t politics. This is economics.

I agree, but you do with the exports, that’s the key component of all of this. If the exports get absorbed, then absolutely. I mean, I think you’re going to see a positive impact from that. The prices will be at a higher, more sustainable level.

Well they could be more easily absorbed if the tariffs were done away with. Isn’t it correct?

I think one could conclude that. Yes.

So, what do you think would happen then to the ag market is my question, if that happened. Would it stay the same or would farmers buy more equipment?

I think you would see the market go back to where we thought it was going to be the start of this year. If you look back at the start of this year, expectations were more robust, obviously, than where they are now. I think the performance has been good in the ag sector, but there was some really good prospects at the start of this year and we -- a lot of people saw that at the beginning of the year till the tariffs started coming into the picture. I think you would get that -- you’d start moving the markets back up to normal trends. There is a replacement demand cycle that would pick up. I think it’s there. All the underlying pieces would tell you that there is availability in the market for it to improve if prices were higher, and I think you would see that happen pretty quickly. And again, all you got to do is look back to the beginning of the year, pretariffs, about expectation levels compared to where they are today.

Okay. So what’s the magnitude of the difference between what your expectations were and what they are now? What’s the difference percentage-wise?

I don’t know if I have that exact number right now, but I think it’s probably about a handful of points. It’s not -- again, early part of the year, I would say things were looking more maybe right around that double-digit, low-double digit, upper single-digit level compared to where we now. As you saw we reported 2%.

Our next question comes from Kyle Krueger from Apollo. Please go ahead with your question.

You had a significant headwind in the quarter associated with the strength of the dollar. And David mentioned, the fact that you’re going to be reviewing your hedging policies and whatnot. I’ll just ask the question straight up. I mean, how do you avoid overreacting to the strength of the dollar, if it is indeed temporary, in a point of maximum pressure as you go forward and set policy? I mean, how do you intend to move forward with respect to hedging? Given that there’s a tendency to overreact at the point of maximum pressure. I’m not saying guys will, but there’s always that pressure.

Well look, I have looked at it in two ways. One, we try to get the natural hedge by producing products in a multitude of different currencies in countries. But really, what we’re referencing with the comments made on the call today about the project to reduce our FX volatility is because a lot of our volatility is driven by legacy intercompany balances that exist between various companies around the world that are a number of different reasons. Some of them are just set up at acquisitions, some of them are related to operating -- current operations. But what we want to do is limit that volatility, those intercompany balances. So what really you would see in our P&L is what you’re alluding to, which is true operating hedging impacts of foreign currency volatility. So unfortunately, what you see in our P&L is just a lot of intercompany noncash volatility.

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

I appreciate everybody’s time this morning. And we look forward to talk to you again at our year-end results. Thank you.