Maurice Taylor – Chairman and Chief Executive Officer Paul Reitz – President John Hrudicka – Chief Financial Officer.

Ian Zaffino – Oppenheimer & Co. Inc. Lawrence De Maria – William Blair & Company LLC Alex Blanton – Clear Harbor Asset Management LLC Philip Volpicelli – Deutsche Bank Securities, Inc. Tom O'Shea – Castle Hill Asset Management LLC Robert Franklin – Prudential Financial.

Ladies and gentlemen, welcome to the welcome to the Titan International Incorporated Third Quarter 2014 Earnings Conference Call. During this session all lines will be muted until the question-and-answer portion of the call. (Operator Instructions) Please note that this event is being recorded.

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 involve risks and uncertainties as detailed therein.

At this time, I would like to introduce and turn the call over to Titan's Chairman and CEO, Maurice Taylor..

Maurice Taylor:.

The other thing that you should notice is that when we made the acquisitions with Titan Europe and we went into Russia, what we did is in Europe we paid off a great chunk of their debt but we did not pay it off references, capital infusion. What we did is we loaned them the money and we loaned them in U.S.

dollars and at a rate that our bond rates are and the same thing was true with Russia and the money they need the capital to run, which says we’re in that partnership, but we loaned the money. And the same actually is true in Brazil.

So needless to say the euro went down and the ruble really went down and so has the Brazilian real, so we – our loan hasn’t gone down because it’s U.S. dollars but all of them had to take the currency adjustments which had ultimately when they can do, they will have the situation in hand, so that they can pay us back. So that is one of the big items.

So what else is the last two weeks on the business side has been very good for Titan from what we have heard.

Number one, you’ve all heard us speak about our LSWs, we just finished with our dealer meetings in Florida and the work coming out of there is probably very high, that we picked up, number one, is that the old heaves have started putting in the options to buy tire and wheel assemblies and combines, tractors and big spaces that are huge.

And that’s been a very uplifting thought because as everyone knows we’re the only ones who produce both the wheel and the tire. In fact, right now, we’re the only ones who produce those tires and wheels.

The good part is, is that we believe as even this downturn happens in the 2015, we believe that the added options will increase not only wheels and tires, our market share will also go up. And we can relate that mainly to how well over the last three years as we've built this risk one, the pull through that’s coming.

We've heard it from our tire dealers and, of course, we've heard it from the OEs. So that’s a – from a farm side, we're expecting it will be little bit more positive than what we were maybe last quarter or quarter before. We had a lot more hope, it looks like we are going to make it with that.

The other situation is that, our construction and the earthmoving even while they have been down, we have gotten quite a bit of positive feedback. So I believe that 2016, if everything keeps going the way it is at this moment, it’s going to be a much better year than what it has been the year that we just went – that we're going through right now.

So that's a good side, okay. Like everything else, it’s a – it’s hard when you decide to track a lot of people in the organization and coming into the year, we are right around 8,000 people and going out, we are going to be right around 6,000. So whenever you take 2,000 people out, that’s a lot.

We knew we were going to have to take a lot of people out of the Russian tire operation. We just did not figure it what we were hoping they could bring certain things up in the production side.

But all those people that we are taking out, half of them are in the – what should call the office staff rights, which were way, way exceeding anything that you would do in our type of business. So we are – we stepped up for that. We expect everything to be finalized. It’s going – it cost us a lot of money this past year.

But we believe as we stated before that that market – the Russian market is going to be a very lucrative price as time goes.

The other situation is in South America, appreciate their currency is falling, but they are going to keep farming that land and we've made some real good strides there in our market share, but it’s time for us what we’ve done is started taking bodies out of there, that’s drastic situation..

So with that I’ll turn it over to Paul..

Thanks, Morry. Good morning, everybody. It was a challenging quarter in a number of aspects as we’ve seen that large demand as far tires and wheels really weakened during the quarter. For us, that triggered a double-digit decline in ag volumes in nearly all of our geographical locations.

We talked about this on the Q2 call that we anticipated the volume erosion, and by end of the June we’d already eliminated nearly 800 positions in anticipating that decline.

On the earthmoving construction side, the markets continued to be on similar trends to prior periods, small constructions up a little bit, while overall mining volumes due continue to remain very weak. Q3 for us is always impacted by seasonality with the summer shutdowns for – in July for North America, then in August for Europe.

But if you take a step back beyond that and the deterioration of volumes from our demand, as Morry mentioned, we had a couple of very significant non-cash items that impact this quarter. Now, I want to bring up that FX we took again this quarter. It’s tied to intercompany balances. It’s something that absent just capitalizing all those loans.

It was not an option that we want to pursue but there are other avenues that we are going to pursue and John will speak to that in his comments, but if you take out the FX and you also back out another couple of million dollars mining inventory write-downs that we had, which was similar to what took place in the second quarter, you will see actually our operational results for the quarter will later on break-even, so if I look at beyond those headline numbers and taking out a couple of those non-cash items and you get a different picture.

Last quarter, I spoke about some long-term (indiscernible) company and we’re definitely progressing forward with those initiatives but with the market conditions being what they are I’d like to take some time this morning to speak more about the current issues that we addressed during the period.

First we continue to focus on reducing headcount to really rebalance and continue to keep our headcount and our costs in line with the volume levels. Through Q3, we reduced nearly 1,000 positions that will generate going into 2015, over $40 million worth of cost savings.

These reductions had been generally across the board as Morry talked about earlier, Russia has been a prime focus that the weakness in large ag demand has no boundaries, and so, all our locations have experienced a reduction in headcount. We’ve also removed a week from our production in Q4.

We’ll continue to do whatever it is needed to future periods to keep our revenue and our headcount in line with each other. This is a major focus in all our locations and this is something that we are fully committed to making sure that the costs stay in line with our volume and our production levels.

Next, if you take a look at our joint-ventures, you’ll notice that Smith’s get loss from our non-controlling interest which is really primarily attributable to Russia, Australia. We’ve been talking about the massive reduction in headcount that’s taking place in Russia to get it down to our targeted level by the end of the year.

As we move into 2015, we will also be driving the production improvements, introducing new products and really taking measures to do some bottom line there.

We went into this knowing that Russia will take a period of time to improve and you sprinkle in a little bit of the impacts or a lot of the impact from the current political business climate in Russia.

And you can see that we really – we’ve responded to take action but again you’ll see in that non-controlling interest a large loss that was attributable primarily again to Russia but it was also, we experienced a lot in Australia. The Australian iron ore markets are half and are continuing to remain weak.

But the bottom line is we need to do better there and we will do better with this business and how we manage it through the downturn. We’re in a midst of a restructuring plan that will reduce headcount by 25% there.

We’re going to consolidate underperforming facilities, really right-size that business to the opportunities that exist in the market and not for hopes and dreams of what we think it could be. And then we’ve gone through a process of really streaking up the management team there to be more effective.

So moving over to North America, we’ve reorganized our wheel and tire divisions. It’s a work together as one Titan. And really what this does, this enables us to take full advantage of one of our biggest if not our biggest strength, which is to produce wheels and tires.

We have a massive arsenal of tool, dyes and equipment in North American Wheel and Tires, especially on the farm side that nobody else can match. And so we really revisited the organization to work as one Titan and we’re starting to see the fruits of that later.

In these current market conditions we got to be knocking up every door of opportunity, so we’ve been restructuring and making changes to our sales organization to be better positioned to do that. And along with that we’ve not separated sales and marketing and created a separate marketing area.

I have to stay this is an area that I’m very passionate about. It’s something I majored in grad-school. I say that because I fully believe that we can drive some significant direct improvements to our bottom line by making this change and realizing that we compete in a very competitive global world now.

And this requires us to be focused on delivering a solid customer experience and how we get our products out in marketplace and so we need marketing product plan that’s tired seamlessly into our corporate vision and then feeds down into operation, sales and ultimately out to customer.

And then we will deliver new innovative products that meet our customers’ needs. Lastly, in October, we announced the closing of our disc press facility – disc pressing facility in Crespellano, Italy. We really have two locations there.

They’re about 50 minutes away from each other, so we will consolidate the Crespellano facility into the Finale location. This project will take us about three years – but it will provide a pay-back of less than one year when it’s completed and so this will make us a much more efficient lien operation in our European wheel division.

And our plants and our locations are logistically very well suited to be competitive at marketplace and by consolidating facilities we will lower our cost point. On the LSW front, this is a big initiative for us and then something that we really put a lot of time and investment to it. And as an organization internally we’re all keeping very busy.

With that, it’s moving a lot very well with the OEMs and the equipment dealers and really the reception in the marketplace by the end-users which is most important, has been very strong.

I encourage you if you haven’t been out for our website to take a look at it there’s some very good testimonials out there that will demonstrate the benefits of what this product does for our end-users. We’re planning a very strong seat for the future with LSW and as an organization we will continue to make the investments.

It’s the product engineering and R&D with our test farms and our OTR sites. And it really fits perfectly with, one Titan and our strength in being able to deliver the wheel tire assemblies like nobody else in the world can.

In my last comment, I just want to talk briefly about what Morry has mentioned earlier as well with our annual dealer meeting that took place this past weekend. We got a good dealer network. It’s always nice to see them and here with on line.

And I have to say that we know these guys very well so after a couple of drinks they’re going to tell you exactly what they’re thinking without any flop. And there was a real solid tone of optimism amongst the group this year.

And the first part of it is they see a general uptick in the replacement market in 2015 as we see the softening of the OEM demand and you look at all the new equipment that was put into the market in 2010, 2011 and 2012 and starting to hit the replacement cycle.

But I think perhaps most importantly for us is, they’ve been impressed with what we’ve done as an organization to improve the quality of our ag tires and improve the overall customer experience for themselves and ultimately their customers.

And so we realized that that’s a continuous journey of improvement, when you’re talking about quality and customer experience, so that’s not something that we’re going to flip back on.

We worked hard to get here today, but we are really proud of what we accomplished and so as an organization it’s great to hear that from our dealers and certainly it’s something that I’m going to pass on to my teams and continue to push that very hard.

We’re committed to doing what’s required to manage through these short term market conditions that we’re in. We’re going to navigate through these downturns that we’re experiencing and in our cyclical end markets and we’re going do that by balancing the required short term changes with positive long term changes.

And then in the end we’re going to be a much better company, and as we move into 2015, we’re going to be in a good position as an organization. So with that I’d like to turn the call over now to John to jump into the financial results..

Thanks, Paul. Good morning, everyone. Well, I’m needless to say Q3 was a disappointed quarter in terms of performance continuing against the backdrop of price reductions, mining downturn and decline of ag and specifically large ag equipment as was referenced by both Morry and Paul. The story is the same as told in Q2.

We’re in a two major cyclical downturn that are eroding every area of our performance revenue, pricing and productivity. Related to mining, we recorded an inventory write-down of $1.5 million to adjust for the value of return mining product to estimated market-value. This is a tire version that was impaired in Q2.

As Morry and Paul both indicated we incurred a significant loss of $13.3 million related to currency exchange. These losses primarily reflect the translation of inter-company loans and balances at foreign subsidiaries, denominating currencies other than their functional currencies. These losses were significant due to the relative strength of the U.S.

dollar. While these translation losses were significant during the quarter that P&L amounts do not represent an actual real life loss from the settlement of the inter-company obligations. We have the ability to dictate the ultimate tenure and timing of these actual settlements.

So as mentioned by Paul, if we were to adjust for currency exchange losses, non-controlling interests and mining inventory write-down, I just identified net-income attributable to Titan would nearly be break-even and $0.5 million loss when compared to $9.1 million loss as reported in the 10-Q.

So let’s begin by talking about revenue, quarter sales were at $450 million, this was down 9.6% from Q3 of last year and $14.1% from second quarter. The 9.6% year-over-year decrease was driven at a gross level, entirely by the reductions in North American ag and mining.

The rest of this is the addition of Russia, $24 million offsetting the other small reductions. Let’s talk a little bit more about ag, both Morry and Paul referenced ag in terms of something that’s really challenging for us right now.

We discussed this in Q2 that we felt we were experiencing a correction that’s occurring in large farm equipment sales after multiple years of significant growth. And while there are different opinions out there many are predicting this downturn to last long to 2016. There are number of negative forces that are creating a perfect storm so to speak.

Gross capital farm expenditures on machinery are decreasing, having come off the historical highs when farmers updated their equipment. This strong cycle of it, I’m referencing this one by record commodity prices, drought has spiked prices, increasing ethanol usage and strong government stimulus, namely the Section 179 and Bonus Depreciation..

Now with that being said both Morry and Paul also referenced LSW. We feel strongly through LSW that we’re going to able to take share and increased profitability at the same time. So it’s specifically our large Ag equipment sales, they were down $35 million from previous year Q3. Ag in total was down nearly $46 million.

And inherent in these variances are also price concessions due to raw material decreases related primarily to natural rubber for which we are contractually required to pass along. Our other market share from Brazil continue to experience the negative effects of the lower ag demand.

Growth from acquisitions represented by our Voltyre-Prom acquisition in Russia, contributed $15 million to our ag segment, unfortunately it was very little flow through the show for it. If you listen Paul, he talked about a number of actions that we’re taking in Russia to turnaround the profitability situation there.

So let’s turn our attention to earthmoving construction, for the quarter sales for earthmoving construction were down $15 million or 8.8% from Q3 of last year.

The inventory de-stocking, competitive pricing pressures, lost leverage and productivity due to the significant decline in sales has compounded the negative impact on our profitability for this segment. Specific to mining, we’re into our second year this downturn and unsure when the market will turn upwards.

We’re having a lot of success with our newer version tires, so there is a lot of positive feedback out there. But still the future is a little uncertain in terms of the market, and how it will react.

Mining companies have slashed equipments depending over the past years and made a glut of capacity, as well as slower economic growth in China and other developing countries. As I indicated earlier, we recorded a $1.5 million inventory write-down associated with the giant mining tires.

This combined with the Q2 inventory write-down in asset impairment totals $36.3 million year-to-date. While this downturn is significantly impacted both sales and profitability at North America, it continues to harm our Australia and global undercarriage businesses as well. I want to make a quick point on consumer.

We experienced some nice growth here, Europe and Russia, Russia being all incremental. In terms of the growth in Europe, this is primarily represented by our high-speed disc brakes sold into Spain driven by demand in China. This product generates attractive margins and should positively impact our GP performance going forward.

So with three quarters complete that puts us at just about $1.5 billion year-to-date compared to $ 1.7 billion last year, we’re representing an erosion of 9.4%. While ag is down $78 million year-to-date, primarily North America driven this would have been $134 million or 15% excluding the addition of Russia.

Earthmoving/Construction is the primary negative force here from year-to-date basis, down $116 million, as Q1 and Q2 2013 were strong quarters for us in mining. Consumer is up $37 million year-to-date on the strength of Europe and Russia incremental sales. Let’s turn our attention to margin performance.

We reported a decline in gross profit performance at 10.1%. That compares to 12.6% from Q3 of last year and 11% on an adjusted basis in Q2. At 10.1% this represents 250 basis points decline in GP performance from Q3 last year.

This is not surprising given the reduced sales and pricing pressures, specifically in our higher gross margin large ag products and the addition of Russia's sales lacking flow through. Net material cost reductions were modest, made up of primarily natural and synthetic rubber, offset by increases in steel and part offset by increases in steel.

Relative to rubber procurement, we have centralized purchasing and are introducing a hybrid of purchasing methods that are designed to reduce both costs and price volatility risk, and you’ll hear more about that as we go forward.

Net material cost reduction – sorry, warranty cost continue to be a positive story in 2014, as we picked up nearly $7 million to the positive side when compared to Q3 one year ago and $22 million on year-to-date basis.

So this is primarily due to the 2013 giant mining tire claims that have worked through the system, and improved quality associated with our new tire versions that we’ve talked about. We're also realizing tangible improvement from compound and structure changes in our Freeport and Des Moines tire plants that have proved successful.

As Paul mentioned this to you or maybe even Morry did as well. We're continuing to get positive feedback and reinforcement that the changes that we're making to our products in terms of improving the quality is very well received.

As we've been discussing and we have reduced head count significantly in our plants to respond to both lower volume in our profitability challenge. While the plants are working hard at improving productivity and reducing costs, we still experience erosion in labor and overhead as this is very challenging overcome to significant impact of lower sales.

Another barrier in this regard with the significant headcount reductions, at times you will have some employees possibly learning new jobs that they have not performed before or having quite some time, resulting in a productivity during – as they come up the learning curve.

As that occurs, that will improve our productivity as well as our cost structure. A quick note on the operating expense side of the equation, SG&A and R&D were up $2.4 million, or 5.3% for the quarter one year ago.

While there are serious of puts and takes across these categories, this increase is attributable to the incremental operating expenses associated with Russia at $4.1 million for the quarter. So moving down to P&L, our interest expense continued at a run rate of approximately $9 million a quarter.

We expect this to continue subject to any further changes in our debt. Foreign currency is strong. And again – this again, we experienced a lot of $13.3 million for the quarter, primarily from our intercompany loans and balances and the unfavorable FX shift that occurred due to the relative strength of the U.S. dollar.

This represents a $19 million unfavorable variance to Q3 prior year as we recorded $5.7 million currency exchange income in 2013. The quarter loss consisted of approximately $9.2 million from Europe, which was a significant swing from the $5.2 million income recorded one year ago.

The recent event in Russia resulted in significant swing from the ruble driving $5.5 million of the loss.

And as stated last quarter and I think Paul touched upon this as well during the past 12 months, we've continued to address the intercompany currency exposures to balance reductions and the development of a hedging policy that we will commence in Q4. So let’s summarize and bring this to bottom line relative to profit.

Our net income attributable for Titan is a loss of $9.1 million, or negative $0.17 a share and EBITDA is $7.8 million. This compares to adjusted net income of $8.1 million, or $0.15 a share, EBITDA of $42 million from Q3 prior year and $1.7 million, or $0.03 per share and $35 million EBITDA in Q2.

I want to reiterate when we adjust for the inventory write-down in currency, our net income attributable for Titan is nearly break-even for the quarter and EBITDA grows to $18.5 million.

So as I stated, when we began this discussion, our Q3 results are disappointing, but are being addressed in a diligent manner by management, Paul talked a lot about some of the actions that we're taking. As mentioned earlier, we reduced our employee population significantly.

In addition to headcount reductions, we're aggressively pursuing a number of business improvement initiatives to address our current profitability challenge. We will continue to aggressively build out our integrative management framework; a component of this EVA was announced in Q2.

We're confident that EVA was significantly enhanced decision-making, transparency, and accountability with a clear link to shareholder value creation.

But going to the balance sheet just for a moment, AR is down $54 million on $74 million sales decrease from the previous quarter, experiencing a nice decrease in DSOs, down two days to 15 and five days from Q1. Inventory is also down $11 million.

PP&E for Q3 was down $37 million, driven by a reduction of $32 million in DTA and $5 million in net capital, so deprecation was capital additions. Year-to-date, we've invested $46 million in capital. Our original 2015 plan was to spend approximately $80 million, and we will spend under $60 million as we wrap up the year.

We've been placing our capital to ensure strategic alignment and generate cash as we stated in Q2. So speaking of cash, cash ended the quarter at $180 million compared to $189 million at the beginning of the year. Through a number of the ebbs and flows, this is primarily attributable to four items. We received a $36 million tax refund check in Q1.

We just recently received $11 million Italy capital grant that was received from the Italian government for earthquake damage reconstruction. And we experienced $70 million net capital reduction. All three of these items offset in part by the $53 million in Titan Europe debt reductions that have been made over the year.

From a debt perspective, our debt to trailing EBITDA measure has doubled from one year ago to $3.79 million. This is primarily a function of our falling profitability as our debt level today is lower than 2013 year end. I want to provide some clarity here as we get this question a lot. We do not have any financial covenants associated with our debt.

So wrapping up, clearly, there is a lot of work to do. You’ve heard about a number of the actions that we are taking on this call. I've spoken about a number of the actions that we are taking on this call. I've spoken to a lot of the analysts and investors over the past eight months that I have been with the company.

And I will reiterate the message that I convey to them. Titan is not a two to three quarter turnaround. While we work diligently to improve short-term profitability, our turnaround is longer-term as we are plagued by cyclical downturns in our two large segments in Ag and Mining.

We strongly believe through market adoption, disruptive, technology represented by the LSW solutions, and elevation of our professional management practice – practices and the ultimate recovery of Ag and Mining, we will prosper again and reward our shareholders for their confidence in us.

With that, I would like to turn the call over to the operator for questions..

(Operator Instructions) Okay. The first question comes from Ian Zaffino of Oppenheimer..

Hi, thanks for taking the call. Question would on the cost cuts, I know you mentioned the $40 million savings, as you look at what else you could do, can you kind of give us an idea of how much larger that cost reduction would be, so would that $40 million go higher than that, or it’s more of a just to be efficiency gains? Thanks..

Well, go ahead, Paul..

Well, if you say a real quick, Morry, that $40 million will go higher. I will let, Morry, address the rest of it.

But that’s just where we stand today, what we've accomplished already, but the number will go higher as Morry mentioned, as Paul mentioned as well that we are not done with what we need to do to get the company right-sized, so we got more..

Could that seem like $80 million, or is more like a $60 million the right number?.

We will work through that as we kind of get through the year end and we get into our plan for 2015, Ian. Clearly, I think, what is demonstrating is that, we've already accomplished a lot that will position us well for 2015. We've done all this in basically two quarters.

So, the impact has been significant not only for 2015, but it will start bearing some fruit here in the latter part of 2014. So we'll give you more clarity on the exact number as we go forward into the future, but I just want to give a point as to what we've already done so far..

Okay. Thank you..

Yes, Ian, one thing to touch on is, when you take these things – reductions, whether they are in Russia, they are down in South America, there are in wheel plants. You got to understand that you've been running certain factories for last four years, which really been banging real hard.

Well, humans, it’s real simple, they add on body after body after body. So now we are growing through as Paul mentioned, and we are whacking. Now, once it really starts moving, we are going to be maybe short in a few areas, but your percentage reference and profit and everything else will go back up.

And now we're trying to set in as I mentioned the situation where you don’t go back and start increasing everything under the disguise of it will get you more. Anyhow, that’s what we are trying to do..

Okay. Thank you very much..

The next question comes from Larry De Maria of William Blair..

Hi..

Good morning, Larry.

How are you?.

Hi, Morry, pretty good. Thanks. Pretty good, just trying to rectify the outlook, you guys are cutting production in the fourth quarter doing some restructuring obviously. It seems to imply, thanks for giving it better but also we’re going through downturn.

So I am just curious, do we have a plan in place to be EPS positive in the fourth quarter in 2015, do we have visibility on that or is that a work in progress at this point..

Are you talking to 2015 or are you talking to 2014, you said 2015?.

Well, I am saying this fourth quarter and 2015..

Oh 2015, I don’t think there’s any problem. You see, I appreciate the last 10 days have been very, very – information has been very good to our company, in other words if you read what I wrote and you can imply that little contradiction, but it’s not really the contradiction. But, if you read my October 16, little message, I talked about everything.

Well, since that memo when out, we not only – well I can’t name the companies, but we have gotten my emails et cetera, that the options have been granted, we have put into their catalogs, so various products on February will start being shipped with our LSW tires and wheels. And we believe that’s going to generate more profit toward the OE.

We also believe it’s going to generate for their dealers a little extra profit. Now, to give you a – and since that time we had one big John Deere dealer who turnaround then ordered 33 sets of our big LSW tires for its customers and the combine. And, he is out there if you know anything that Midwest has been really wet.

And there is two pieces of equipment running through these wet fields, one with track and one with our LSWs. There difference is you can go fast with our LSWs than you can with track, and track is $75,000 a set, where a set of LSW is on the front are probably about $10,000. So, this dealer was at our meeting in Florida this past weekend.

And he mentioned how some farmers have called them very, very thankful that he bought the tires instead of going for the tracks. And I have personally been with some of the major OEs and I attribute that their interest and desire to put this into their pricing book has come strictly from what we have been doing for three years and that’s a big push.

And if you look here at it, Larry, where let’s just say, whatever percentage, whether we were 35%, 40% of the large tire business in big ag, when you start every big ag machine will perform better with our LSWs. So I have been told that our percentages are going up in 2015. And I would think that LSW is going to be part of it, big time.

So everything we’ve heard them last two weeks and this is just not also ag by the way, we’ve got the same situation happening in the construction side..

.

:.

I don’t have any visibility, but if we even get half of what I think we’re going to get, hell yeah, it will drive everything, because once you put all these cost reductions, putting the bodies down we’re going to be in pretty decent shape. At least that’s how I feel..

Okay.

And for – in the LSW, how many OEs are you on now? Is it – do you just got on the morning, the biggest one that we hoped for?.

No, no. I can’t tell you that. I’m going to – there’s not a lot of choices there, is it Larry? You get my ass in trouble. Now….

Well, you’re the biggest….

Well, right now, we’re at – we’re on two of them and I believe by March this next year we’ll be on a lot more, okay?.

All right, congratulations on that.

And then, Morry, can I just ask you, what are the OEs at talking now about volumes, is there a change, is it getting worse, is it sentiment change in the OEs, when they’re saying 20, 25, 10, how do you we think about sum it up between the…?.

I think that I can just tell you the OEs aren’t saying the diddly-damn, okay? Because I don’t think they really have the handle on it. I can tell you that we had some equipment dealers at our meeting this past weekend and some of them are doing pretty good. They also know that, they’ve got every supply of used equipment.

And they expect certain items to slow up. Again, we also found out, how would you like to have bought a great big tractor. Like I said in my letter, you bought a tractor a year ago, you pay $300,000 for it and now with power hops and road ships that you’re trying to hoe the stuff down through the field and you could never keep up with the track.

And now if you put these other tires and wheels, you’re running right with the track and saving 6% of your fuel. But you’re kicked off because your tires you got are good, everything is good, but they give you the wrong thing. So, it’s like a lot of tire dealers, some equipment dealers are trying to figure out how to have an exchange program..

:.

Okay. Thanks, Morry. Good luck..

Thanks..

The next question will come from Alex Blanton of Clear Harbor Asset Management LLC..

Hi, good morning..

Good morning, Alex..

Good morning.

Can you hear me?.

Yeah..

Okay.

Morry or Paul, could you give us a detailed update on the tire re-commission project which is scheduled to start sometime in 2015? How many sites will there be initially? What will be the estimated revenue and profit from those sites?.

Okay..

There was a lot of information given about that in the past, but recently we haven’t heard of lot so we need an update on that..

Well, we have just – like everything that happens in the oil sands, you have mountains and mountains of regulation. Okay? So what happened is we have approximately between 10 acres and 12 acres that we have signed from our friends at Suncor.

And we have – at this point you have to file all the paperwork, because it’s up into that territory, so we got the EPA, you got some of….

Can you just skip to the bottom line, when will this come online and how much will it…?.

We are going to be – we are currently right now, we have just gotten rode into the site. We’re going to fence it off. We are not going to turn around and try to pour concrete in this period of time through the winter.

So probably in March we will be back up there, we will start – well our plan today which you want to know is to be able to fire the first set of reactors off at August of this next year, all right..

2015..

And what we’re looking at is, we are looking at having six reactors up there and we are looking at those six reactors to generate somewhere between the 30 million and 35 million on just the tires..

That’s per reactor or total?.

Total, okay..

30 million to 35 million from the six reactors?.

Yes. And then we’re looking at putting – the government has requested we put a facility up down towards between Calgary and Edmonton, and if we do that that will have three reactors. And we’ve been asked at numerous other locations, but what we’re going to do is, do the one first, because it means so much, it does not just mean reclamation services.

It means wheels, tires and tracks..

What’s the profit margin on the 30 million to 35 million?.

It’s substantial, that I have partners too, prior the partner we have is Suncor and of course, Green Jarbun [ph], so it has a very fast pay-back, let’s put it that way..

Fast past-back, I think, didn’t you mention a 50% margin at one point?.

Well, there’s an awful lot of stuff out there, but I would say that’s a very doable number..

50% margin on the 30 million, 35 million.

Got a 5 million per reactor revenue?.

Well, you do more than just a reactor, you got – you got your carbon black, you got your steel, you got your oil. How do you know now if oil is dropping like it is, all right? The only thing we’re pretty good about this is, it’s bio-oil that, now we get all the improvements, we’ve all tested it.

The EPA in the U.S., the Canadian in EPA, because you’re using natural rubbers used in all these tires, it comes from rubber trees. So it’s kind of – the traces are going to be bio instead of synthetic rubber, you’re using the bio. So the situation is you get paid like price as much for bio so we’re going for the certification..

Okay. Thank you very much, Morry..

You’re welcome..

The next question will come from Philip Volpicelli of Deutsche Bank Securities, Inc..

Good morning..

Good morning, Philip..

So what I’m trying to find out is where is the inventory right now within the income statement, is that in COGS or it’s in SG&A, because I don’t see it broken out on the line item?.

That’s going to be in COGS..

Okay.

And then the cost savings that we’re looking at, the $40 million, I believe you’ve already, the heads are out, so those savings should start coming in, what the timing of when we’ll achieve the full $40 million and is that coming out of COGS or SG&A?.

It’s coming out of both..

Yes, coming out of both and the timing of the savings, this year you’re still working through any recorded severance payments and the likes. So the timing of the savings if that’s been removed from the company now, the flow through will start in 2015 without the hindrance of the severance payments.

So it’s coming across really all areas like Morry said, it’s both SG&A and COGS and it’s more heavily geared towards volume so it will be geared more towards the COGS but it’s across really all locations..

Okay.

So maybe, two-third, one-third COGS versus SG&A, saving, those kind of outlook?.

These are rough numbers..

Okay.

And then obviously a part of your business is selling tires to existing equipment that’s out in the marketplace, can you remind us of what the percent of ag, earth-moving construction and consumer, is selling aftermarket tires versus new equipment going out the door?.

Well, you’re looking the aftermarket as always been in the range of 65% to 70% of the tire business, okay? So, that’s what the aftermarket compared to the OE is, but the OE is generally speaking is at a much better position to try to look forward and to get them in the aftermarket because of our wheel business.

That’s what we done there, so everybody can say, which one is the best. We think we've got the right idea unless you can get your volume up, we’re going to push the LSW into the aftermarket, because the cost, the wheels will not be, are not the heavier costs. They've got good margin better than the other, but this is what we have....

Okay.

And I guess what I'm trying to figure out is, obviously, there is some inventory in the channel and dealers that hold this as they destock already, or is there more destocking to go in that aftermarket business?.

I don’t think the dealers that we have that we are dealing with, I don’t think that they are in a situation of destocking..

So are you still seeing good flow through from your North American ag dealers with tires and construction with the....

I was just with them and they all talked pretty good..

Okay. All right, that’s great.

And then in terms of the comment early about no financial covenants, that includes the ABL, there is no – any covenant in the ABLs, is that right?.

Correct..

Great. Thank you very much..

The next question will come from Tom O'Shea of Castle Hill. Go ahead..

Hi, can you just go back over the guidance, I saw the October 16th statements, and now I'm just trying to figure out how that compares what you are saying in the call today.

Are you saying that you think sales will be up now in 2015? Could you just speak to that? And then I saw last November you put out management goals, will you be doing that again this November? Thanks..

All right. The first question is, we send out that, what I thought on October 16 would just be that, if the LSW takes off like it is going to be a good year for us in 2015.

But we had just at that time, we turned around and we did not have any sign, concrete talks on the – our OEs, but since that time, we have now in December, I will be meeting with – our OEs to – we do how many and what orders are coming into them.

So between now and then and by the way, it took eight months just to put part numbers in, so not from us, but from our customer.

So what we’re going to do is (indiscernible) as soon as we get the final numbers and then everything else, we’re going to get not only all of our – it’s our big farmers that we used to test stuff, but we’re going to turnaround in hit all of the dealers out there and equipment and make aware, however, there is not only the negative that are used out of the equipment they are selling, but they can make a little extra money.

So I personally believe, we’re going to have a much better year in 2015 that we even talked about two weeks ago, okay. And around the guidance side, the OEs are not going out like they are used to the one here. They gave us and they move –they’re moving too much, so that, I can look at it for a short period of time.

But I think, we’ll have a much better feel on December, and if we get a good feel we’ll go and tell the market..

Okay.

And the working capital for this year, do you see much more cash pull out of working capital in the fourth quarter?.

No..

Thanks very much..

You’re welcome..

The next question comes from Bob Franklin of Prudential Financial..

Hi, quick question for John.

Did you tell us how much the $40 million is going to cost you to implement?.

No, I did not. I did not, sure of that..

Would you like to share it?.

I think all I will say is that, in terms of 2014, the net savings that we’re realizing through the reductions, it’s fairly marginal because of the severance..

Yes, I mean, a lot of the costs for that $40 million save will be absorbed in 2014, I think is the benefit in 2015..

So, the comment, Paul, made about the $40 million, that’s the annualized impact that we expect in 2015, absent severance costs that we’ve incurred this year..

Okay, so, okay, got it.

And how do you feel about your ability to be cash flow positive in 2015 all in?.

Well, we’re in the midst of planning 2015 right now and we don’t have that result at this moment, but certainly that’s an expectation and then objective of 2015 is to be free cash flow positive..

Robert Franklin – Prudential Financial:.

:.

Yes. What we’re trying to show and let me explain this. It’s like – if you’ve never been at a farm we knew – to give you an idea to go to our website, you will see one big guy that buys about – I think he buys 20 some combines from our friends and some other dear. They – he ran the LSWs on his combine for two years.

And he just – now that’s two combines, and he will say the drivers what they find, first they save 6%, okay. So he will go to the LSWs all the way across. But remember, if you buy $200,000 great big four-wheel drive tractors, you are spending almost – the farmer spends almost $50,000 of that tractor on tires and wheels.

So what happens now is the guy that bought that same tractor last year, and he has got the 800x38 instead of 800x46, he is going to be ticked, I would. And so the OE hasn’t quite caught up and like the fellow from the timeline [ph] says, on the video he says, well, how in the hell they expect to give you the same equipment with same tires and wheels.

And they’ve added the carrying capacity by 12,000 pounds. It’s absurd and they’re right. So what we’re trying to do is educate them all. That this is what you do and there is four-wheel drive tractors that got 400 horsepower to run on those, which is just have our super singles, less compaction and pull more, better fuel-mile, fuel economy, everything.

So that’s what we’ve been doing out in the field and that’s been driving to the OE, the next part we have to do is drive it to the aftermarket and if we do that, then as an old man it will be a very, very sweet wine. Okay..

Hey, Morry, I wanted to elaborate a little bit on this question and touch upon previous question relative to aftermarket and profitability improvement in terms of LSW and the aftermarket. So we need comments about ag being in a downturn and farmers reluctant to buy new equipment.

So they are going to be holding onto their existing equipment a little longer, but that will not impede them for looking for an edge relative to productivity gains and improving profitability, they’re businessmen in the end.

And that’s where LSW enters, so if we can target those farmers that maybe coming up on their tire replacement lifecycle or they understand the big gains that LSW brings relative to productivity and profitability we can target them in pull both now the wheel and the tire through aftermarket.

So what does this do for us? One, our profit margins or gross margins are higher in aftermarket. Now, we’re pulling the wheel. We’re traditionally we’re only pulling the tire. So this is going to be a very specific strategy for us in 2015, not only to grow sales but to grow profitability..

Is there a rule of thumb that you can maybe give us where you could say, look if you just replace these old tire with new tire like, I would say, look if you just replace this old tire with the new tire like I would do on like, or it is going to cost blank, if you replaces the old tire with the LSW set it’s going to cost this and – but it’s going to be a X number a year payback?.

Maybe, I could address that question, because we are actually addressing that as we speak because one of the challenges that we see, especially in this downturn is the farmers’ willingness to spend more money.

And we’re actually going to quantify the value proposition associated with LSW so that becomes a much easier decision for the farmer to make, because all of the attributes that Morry has talked about and Paul is talked about in terms of fuel economy, productivity, getting the fields – between fields faster, all of those productivity gains have a dollar value associated with those with them.

And we’re going to quantify this so it makes that decision so much easier for the farmer in terms of making the purchase..

Okay, would you share that with us when you’re done with it?.

We certainly can share the concept, yeah..

Okay, thank you..

Thank you..

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

Thanks, everybody. We appreciate it, and we’ll talk to you in the future hopefully. Ciao..

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