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Titan International, Inc. (NYSE:TWI)

Q1 2008 Earnings Call Transcript

April 29, 2008 9:00 am ET

Executives

Maurice Taylor – Chairman and CEO

Kent Hackamack – VP Finance and Treasurer

Analysts

Charlie Rentschler – Wall Street Access

Randy Laufman – Imperial Capital

Ian Zaffino – Oppenheimer & Co.

Alex Blanton – Ingalls & Snyder

Roy Johnston – Oppenheimer Capital

Phil Volpicelli - Goldman Sachs

Shannon Collins [ph]

Jeffrey Sue [ph]

Jimmy Young [ph]

Wayne Moore [ph]

Alfred Charles [ph]

Matt Channing [ph]

Operator

Ladies and gentlemen, welcome to the Titan International Inc. first quarter earnings 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 this 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 and any forward-looking statements involved risks and uncertainties as detailed therein.

At this time, I would like to introduce Titan's Chairman and CEO, Morry Taylor.

Maurice Taylor

Good morning everyone. It a great morning out here in the Midwest, sun shining. Hopefully all of you have got the press release and everything. As most of you can see, the first quarter was quite an interesting quarter besides having or making some money and everything, but the – I don't know who's doing the call but I got a lot of people talking, so hopefully everybody can figure out who's not supposed to be talking. Anyhow, the first quarter of course we have our – what makes it really kind of unique is because Easter came. With these big plans and you shutdown, comparing it to last year's when Easter was in April, we lost three days, almost. So, it really, really makes it a super, super quarter. And things, as the quarter started and as it went, it's just building momentum.

So, we've got a number of things to talk about, if Hack goes through all the numbers. The first discourse is, the first quarter had seen the 63 inch tire. And we also have, the second thing is, we got to talk about the Ag boom. The third item is Titan Europe, but I might as well just stop and if you wonder why between the – the Brits, with their takeover panel and between the SEC, I don't know which one rules the other, but anyhow, they are adamant that nothing can be talked about unless they bless it. So therefore, they're trying to take this wild dog and put a muzzle on me. So, there's nothing we can really talk about when we come to Titan Europe. The other subjects – anything, I guess, of my opinions I can give that. Last I checked they haven't shut me up on that.

But let's start with the 63 inch in the OTR section. February 15, as the press release previous went out, we built the tire. Recently, as seen in press release, and I can only back up and tell you, for those of you who have been out and take a tour of the Bryan facility, especially those at – showed up last fall and wondered if we were really off our rocker that we would do it and those who came through afterwards and seen we did, that is a very, very remarkable achievement that an awful lot of people put a lot of sweat into and a lot of thought, and I commend everyone for that.

We built that tire and then down here in Quincy, which very few of you have seen, we built the world's largest bull wheel. And as that press release talked about things, that's the same way that you test the tires and the landing gear for a space shuttle, and this baby is huge. We did put on the Internet a photo of the tire running. A lot of remarks have been, "Why didn't you put a person there so you can see the size of the – how big it is?" Well, to stop and think, that tire's 13.5 feet tall. You can't be in that building if the thing is running. And everybody was so excited about it, nobody really volunteered to go down and stand there, so maybe I'll find someone that's in disfavor and put him down there.

But anyhow, it's really remarkable. We have put up – we've built probably a number of tires and test tires. We have put one on. The first test tire came down this past week. We ran it until we had a separation. I would have to say that I lost some bets, I didn't think our first tire would go the loads and the time. It surpassed my wildest thoughts. This next week, we should have one more tire back down.

Everyone was thrilled that what we achieved, the carcass of the tires surpassed what we expecting. We've – we're really excited and we think we're right on the march. In fact, we think that it'll be the best thing that we've probably ever really accomplished referenced from a technical and ability of what we got. So, we're really, really excited about that thing.

The mining business is still just popping along. Let me explain. Mining reference anything that of a tire that is a 40 – 39 and up. You build them, you ship them out, that's all there is to it. They're really good. The other side, which is in the OE, which is more their quarry everything, exports are going good. The U.S. market is probably, because of everything else, is on a softer side. It's not rip-roaring but it's not bad either. But, we believe that as we move into the second quarter, we are going to push a little harder on the export side because of the dollar, and damn, I love the dollar dropping.

The situation is fine in the open top containers, which is a bitch. But that's – everything there is just rocking and rolling, so we're really excited. What can you say about the agricultural boom? It's just starting and I believe that the market is going to continue. I appreciate that you are all reading this shortage of rice and you've got enough intellectuals telling you all the things that they're writing in the papers and on TV. I don't think they know what they're talking about.

But when you take a look at what's happening, the boys in Arkansas, Florida, Louisiana, California, they just got to be loving the price of rice, and that's a short term situation. Farmers will grow it. You fly across this country right now, where you see green that means it is winter wheat folks. There's two crops that's going to come off that land, wheat and soy beans. The corn was in ethanol.

Again, farmers are going to make so much money, and they're spending it. They're spending it now. I believe our friends at Deere in a few weeks will be talking about the record for six months they're going to have, and I think it's going to go out for a number of years. I think everyone is – and the reason being equipments are going to be running everything. You cannot build more plants and everything else.

It's just – stop and think about it, it's just the way this old, great Earth is, man. The U.S. is just in the perfect spot. North America is for farming, better than any place in the world. So, we expect the Ag to really, really just continue. We think we're about not even 20% way up on the upcurve, at least that's my impression, but what the hell, it could go any other way. But, I don't see with everything cranking the way it is, it's just super good.

One thing that has happened in the first quarter is the price of materials have all gone up. And as I've stated a number of times, we pass that pricing along. We have had price increases that went into effect on April 1. We've had them that went in on March 1st. We're just passing them along.

To give you a shocker of all shockers, steel went up on April 1, I'm in to the second quarter now. We've passed that along and steel is going to go up in May at record pricing. So, the steel boys are going to come out of their slump and that's all because of the U.S. dollar too. We have went out and announced a price increase on June 1, and – for I can cover that, on the aftermarket for this is for tires and it's going to range from 4% to 35%. So, don't take an average. The reason it's such a range is because what we're going to do is we're going out with the attempt to make sure 3,000 some odd tires I think were produced, that if we're going to produce those tires, we're going to make a respectable margin.

Well, we're not, and this will entail some tires going up and some tires not. The big ones you're seeing was at 35% will probably fall into a lot of the radio tires that in the after market, because of the demand. And all these demand that's going, in the previous we announced that we were bringing up the equipment from Brownsville and from Nachez and we'll be putting that equipment into Des Moines facility and the Freeport, Illinois facility.

This is equipment that, as I mentioned, we've had in the Nachez and Brownsville facilities. So the cost is the cost to move it up the road and install it and this stuff is huge. So that will probably come on stream for us in September-October frame which will allow us to be able to produce even more of the large rear and large turbine tires. We're probably the only one on the globe right now that has the equipment that they can lay their hands on and move it around. So we're very excited about what we're doing there.

We're also excited with – what we found in, as I mention earlier, with the 63 inch and a lot of the technology and what we found in the costing is going to start to flow into the agricultural side, as we end this coming year. So, we're really excited about it.

And with that, I'm going to turn it over you, Kent.

Kent Hackamack

Thanks, Morry. I just want to take a few minutes here and highlight a few items that occurred during the quarter. Remind everybody that we have, Titan has filed with the Securities and Exchange Commission the SEC report on Form 10-Q for our first quarter ended March 31, 2008. We are on the calendar year here.

As Morry mentioned, we had an all-time record in our first quarter sales. We achieved $253.5 million. And when you compare that to the $226 million in the first quarter of '07, that was roughly a 12% increase. As Morry mentioned, our agricultural product offering had an exceptionally strong demand during the quarter. And looking at the quarterly sales by market, you can see that Ag sales increased by approximately $38 million or 28%. We reached $173 million in the quarter and that compares to the $135 million in the first quarter of '07.

Moving over to the earthmoving construction sales, it remained strong for Titan. We reached $73.8 million or nearly $74 million this quarter and that compares to $75.1 million in last year's first quarter. Dropping down to the consumer sales market, we achieved $6.2 million this quarter, that's down from the over $15 million that we recorded in first quarter of '07. And looking into that large reduction, that related to lower sales to the Goodyear Tire and Rubber Company of approximately $9 million when you look at the quarter-over-quarter basis.

Morry mentioned the raw material cost still continuing to move up, and even with that happening to us, the company's gross profit increased $5.1 million or approximately 19% to $32.3 million in the quarter and that compares to $27.2 million in '07.

Looking at our SG&A cost, they were $14.1 million and that compares to $11.3 million in first quarter of '07 and the higher SG&A cost related primarily to the higher selling expenses of approximately $1 million. That was due to the record sales levels and we had higher professional fees of approximately $1 million on a quarter-over-quarter basis.

Moving to the income from ops line, it increased nearly $2 million or approximately 12%. We got to $16.1 million and that compares to $14.3 million in 2007 first quarter.

Moving below the income from ops line, just to remind everybody, in the first quarter of 2007, we had the $13.4 million one-time non-cash convertible debt charge and that charge was associated with the acceptance of 100% of our approximately $81 million of our convertible notes that were converted into shares of Titan common stock last first quarter. Taking that conversion charge in the 2007 numbers, Titan's first quarter net loss was $2.5 million or $0.12 per share loss in '07, and those numbers compared to our net income of $8.1 million and basic earnings per share of $0.30 in the first quarter of 2008.

Moving over to the balance sheet, March 31, 2008, we had $47.5 million of cash on hand, accounts receivable was $133 million and an inventory balance of $124 million. As Morry mentioned, we have Titan's investment on the balance sheet related to Titan Europe Plc, which is our 17% ownership. And as he mentioned, we really can't talk much about that given that we filed the preliminary proxy statement with the Securities and Exchange Commission on April 11, 2008.

Talking about the capital expenditure for a second, we had approximately $21 million during the first quarter of '08 and approximately $16 million related to the giant OTR project Morry was talking about, and we had approximately $5 million that related to other ongoing Titan projects.

Moving to our debt balances. There were no cash borrowings on our $250 million revolving credit facility at March 31, '08, and our only debt is the company's $200 million long-term debt of 8% unsecured note, which is due January 2012. Titan's short-term debt is zero at the March quarter's end, and our equity account moved higher during the first three months of '08. Our equity increased by over $8 million in the quarter. Our equity balance moved up from $272.5 million at year-end '07 to a balance of $281.2 million at March 31, 2008.

Remind everybody, the company's website is www.titan-intl.com. And with that, Anthony, let's go to their questions.

Question-and-Answer Session

Operator

(Operator instructions)

Maurice Taylor

You mean there's no questions? This is a record.

Operator

(Operator instructions)

Maurice Taylor

You goofed up, Anthony.

Operator

The first question comes from Charlie Rentschler.

Charlie Rentschler – Wall Street Access

Yes, good morning, Morry.

Maurice Taylor

Good morning, Charlie.

Charlie Rentschler – Wall Street Access

As a simple bystander, I guess thinking about the 63 inch tire, I would define success this summer as a brand-producing production tires of production equipment. Now, but can you elaborate on what that means, what is going to happen for you to throw up your arms and declare victory?

Maurice Taylor

Well, I'd say victory is going to be where you turn around and you are producing tires in July that you're shipping up to the various mines not only in North America, we'll ship some around the world, and that by the time that December rolls around, because you're putting in the production equipment all through this year, and what happens is that you turn around and the results from what you've put the last – by that time, be over a year of effort into, that the feedback – and you're only dealing with 30 mines, so they all talk to each other, that we succeeded in what we said.

We will build the best tire that would outperform, and now what happens is you turn around and all the other ideas, which what we call as our little sidewall tires, now they're – want to go with that. So, you pretty much have gone as, Charlie, you're one of the only ones out here on this phone call that's probably got me by a year or so, before I – a guy and a career, you can turn around and crack one big ass smile. I appreciate shareholders only interested in the money, the old saying, "show me the money!" Well, you'll see the money. But for my own self and the people that put the effort, that's when you crack a smile and raise the hands in victory, I think. So – because after that, it is just a case of pop them more of the same damn thing out.

Charlie Rentschler – Wall Street Access

Okay, so what you're saying is that will be in fall or maybe a little bit beyond before you get the feel – the feedback from specific locations in the field that ...

Maurice Taylor

Oh, hell, I'm out there in the field and if you think it is going to – I want to wait until the – everybody is sat there and signed on that this is it. Hell, I'll jump that gun three months ahead of time.

Charlie Rentschler – Wall Street Access

Okay.

Maurice Taylor

I'm pretty – when you see this, and this is – everybody has to understand. There is no one in the world that's tested these tires the way we did, with the air. Our friends at Bridgestone spend a ton of – millions of dollars on test facility. Well their selling full of water because if these tires blow and you got air, you got to build your building for that can withstand an explosion. So, I mean, it's pretty awesome and we're pretty proud of the feat that we not only built that frigging tire, we built the facility to test it and we've destroyed our first one. The next one, as I said, will go up next week. When you cut these tires in two and everything, by the time you slice them and dice them, it's a – this is a – in our business, this is like lightning speed, to anybody else it's like slow, but this stuff is big, it's huge. You've seen the first one, Charlie, you know how big that tire is.

Charlie Rentschler – Wall Street Access

Sure.

Maurice Taylor

And this is not something for the fainthearted that you turn a light switch on. We're really excited about it.

Charlie Rentschler – Wall Street Access

Well, that's wonderful. As a follow-up question, I know, I'll get jump back. I was a bit surprised by the softness in earthmoving and construction. Is that kind of a bifurcated situation where you got the weakness domestically, especially with smaller equipment but still strength overseas or can you give us some more?

Maurice Taylor

Yes, you've already seen the Caterpillar and what the Caterpillar, I think what happens is you have a total on that big stuff but that's not the earth mover – bust the earth mover away from construction. Construction, and our tires and our wheels have the tendency to flow into the Ag side. So, when you see a backhoe, a skid stir and telescopic handlers, those run off the agricultural equipment side. When you turn around and you go into the earthmover, that's more in your roads, your bridges and everything else. And I think you're going to see that just because of the seasonality, you'll see that picking up a little bit more as this year goes on. I mean that's my own personal belief from what I've seen.

Now, from the overseas, the market side of the U.S., it has been where you can compete in the U.S. And I think price sensitivity is more right now in the U.S. side, North American side, than it is overseas. So, our attitude is that "Hey, let's ride all the bushes on overseas." And that's what we're doing. In fact, we've – the problem we've always had is where we would make them send the LCs and everything up front, and now we went and applied with the I think it's the Import Export Bank and I think that paperwork is due to be finished. It's not finished now, it will be due in the next week to 10 days and then we can really start pushing the exports. And the reason why I want to do the exports is you get more money, point blank and simple.

Charlie Rentschler – Wall Street Access

Okay, thank you.

Maurice Taylor

You're welcome.

Operator

The next question comes from the line of Randy Laufman.

Randy Laufman – Imperial Capital

Hi, good morning guys.

Maurice Taylor

Good morning, Randy.

Randy Laufman – Imperial Capital

Morry, can you talk a little bit more about the Deere agreement that you just signed and maybe elaborate as to what the tire contribution from Deere was last year as well as what kind of pricing terms you have in that agreement?

Maurice Taylor

Well, the Deere agreement – because you have a bunch of – everything is confidential and besides having, on this call, Randy, could have their competitors and everything else, and have my competitors. But the reason the Deere agreement is – and the only reason it was made public was just because of the material effect reference the dollars that you're talking about. We have signed numerous contracts with other companies. They don't reach that magnitude because, hey, Deere's 50% of the market, period.

So, what happened with Deere is the situation, as everyone should know, and I believe Deere has made this public, that they see this farming economy continuing to grow in the years going forward, and it's the breadth and the speed that it has taken on is actually greater than, I believe, what they thought. If you look at their own information a year ago, less than a year ago, you would have seen that Deere forecast what they thought the main crops would be. And of course, they're so conservative that it just went right on by them.

So they're a big corporation, so they're struggling to, like anyone else, to jumpstart their capacity getting more out. Well, in the same token, you have the situation where in the tire business, even though you might have this physical size of the plant and everything, these things take time to churn, and you really have in the big radial farm tires, you have only two sources in North America. You have our friends at Bridgestone Firestone and you have our self. Anything else has to be imported.

And so, with the price of the dollar, manufacturing is great in the US of A, but the only ones that had the capacity, because our friends at Bridgestone Firestone, they took on a lot of business back in '06 and '07, they do a great job, and they have a philosophy of running their factories 24 hours a day, 7 days a week. Somebody said that, "that's the way they do it." Well, when you get a bone like you have now, you just can't pop more out that takes them a lot longer to try to ramp up.

So, I think, what Deere was concerned was that, "Hey, we don't want to have a tire problem." So, any way you look at it, you're going to come over to see us because we're the wild ones on the street that will make it happen. And so, it was a very good arrangement from Deere and for Titan and so, they're not going to have a tire problem.

Now, the answer to your question in the technical financial side, we've already had an agreement for wheels with Deere and we already had an OTR tire agreement. We never had a farm tire agreement. And so, what transpired is that we took the farm tires, basically the North American side, and we listed all the tires and Deere put down the percentages that they would like Titan to produce for them. And of course, we agreed upon this and it's a – the first year, which would be this year, we're probably looking at, I would estimate, close to $50 million to $60 million increase over what we did previously in the same relationship if everything runs the way it is.

The contracts are for three years and they have price escalators every quarter up or down and we put the formula that we used for everyone else. And we expect to enter into similar contracts with some other companies and that will lock our base out for three years and then that allows us to crank up the volumes of these huge plants. You've been through these plants, these plants are huge.

Randy Laufman – Imperial Capital

Yes.

Maurice Taylor

So, it's real simple. There's probably no one on the face of this planet who can, in a very short time, be able to pump out a hundreds and hundreds of millions of dollars of added capacity that Titan has the capability. And at the same time, everybody has to understand we are also pumping up our big mining tire business and the mining tires are not just the 63 inch tires. We are concentrated on the 63 inch right now, but by mid summer, we are going to be off doing the 57, the 51, the 49s, the 45s, and the 39s and we just started this past week producing the 2400 by 35 radials. So, we're – we got a lot of activity going and so let's – good times are going to roll. This is a little bit like the roaring 20's for Titan right now. We have no idea when the hell everybody is going to jump out of the building, but right now, we're going to party right along with them.

Randy Laufman – Imperial Capital

Great. And just a follow up question, you mentioned in the Q that there was about $1 million of training costs associated with the OTR. Just wondering if that's going to continue, obviously you're ramping up, and you're going to have to train more employees. Do you see that …

Maurice Taylor

Some people get lazy and want to retire early, you see. Well, I was trying to get a rural test that no one could retire until they got to whatever age I was when I decide to retire, you see, but I guess that's against the law. But we also – and it goes to Charlie's question or comment that he made is that, you've got to get yourself ready to start right up in the production run and everybody knows that come July 1, I'm in the production mode. So, what happens is, between everybody want to know the transparency, I do not have any hidden, as we call it, charges but we've hired a lot of people that we've been running through the facility and they're being trained to build tires and everything else, and this is just part of the normal process when you're going to ramp up. And our employment's going to ramp up, and our – for these big super giant tires. You sure the hell don't want to be having trainees build these things. It's bad enough. I'm building them now and I'm cutting them up and you were looking when I cut them up, these's 50 Gs. Okay? So, I've already cut six, so that's 300 Gs. So, that's just part of the process. We just – all of this is from – you guys raise so much hours [ph] with me, everybody is looking at every little thing, so where are these bodies and ...

Randy Laufman – Imperial Capital

And then just lastly, are you speaking to the four year guidance that you've given the last couple of quarters?

Maurice Taylor

I got in trouble with that. You see you're not allowed to do that with the takeover panel from Europe.

Randy Laufman – Imperial Capital

You're right there.

Maurice Taylor

So, they're all sitting here. They've got, I guess, I'm just a little devil, the barbarian. So, God bless some all over there. I mean, let's be honest about it. The shareholders over there get to vote. My shareholders get to vote. What the hell we're doing with all this other, but you can't sit here, the fork goes on the left and the other on the right. Hey, the lawyers, everybody is having a conniption fit. I mean, you have seen the press release went out. You got to call them up if you buy or do their stock, okay. Of course, I don't know how they ever monitor that over on this side, but God bless them if they think they can. We're still a bunch of loud people over here. I think they ought to spend more time watching the sub prime and all the rest of you guys, but hey I can't comment on it, so and I can't give guidance right now.

Randy Laufman – Imperial Capital

Okay, I got it.

Maurice Taylor

All right.

Randy Laufman – Imperial Capital

All right. Thanks a lot, Morry.

Maurice Taylor

Thanks, big guy.

Operator

The next question comes from the line of Ian Zaffino.

Ian Zaffino – Oppenheimer & Co.

Hi, good morning, Maurice.

Maurice Taylor

Hi. Good morning, big guy. I see you got in kind of early this morning.

Ian Zaffino – Oppenheimer & Co.

Yeah, I did. Okay. As far as the price increases, I've always thought that in a rising raw material environment, that's good for you because you're able to pass through some uprising. With this April 1 price increase and then the new June 1 price increase, are we going to get ahead of the curve here?

Maurice Taylor

I would love to, but, you know, Ian, you know how many customers are on this phone? You know how much trouble you just put me in to? They're watching me like a hog. You know, its one thing to talk about our – the English takeover panel in the SEC. That set of rules and regulations, but, you start screwing around with my customers. You know, they'll have contracts sold on me. I mean, hell, they'll be oil in the steps when I go to the walk-ins. So, now you don't – you don't – its a game of trying to stay even, okay. You know, that's pretty much where it is. So, I think the market dictates so that we do not have to sit there and pay at all out and then go up to our customers and say "here, we pay this out and this and that." I think that in this market, they've – they realized where it is. We have enough inventories, so that – however, the increases we're going to see, we're pretty happy that we're – we've got our backside covered. And, I think we've satisfied them that we're not, you know, but network to them either. So, it's a – it should be a neutral situation for me.

Ian Zaffino – Oppenheimer & Co.

Kay. So, if we're to look at the June 1, that is just in tires?

Maurice Taylor

I've just tires.

Ian Zaffino – Oppenheimer & Co.

And that's Ag tires?

Maurice Taylor

That's, well, I'm all – that's all tires to the after market.

Ian Zaffino – Oppenheimer & Co.

Okay. And then, the April 1 is what?

Maurice Taylor

April 1 was OEs.

Ian Zaffino – Oppenheimer & Co.

OE Tire and wheel?

Maurice Taylor

And wheel. That still went up April 1st, those are all ready done.

Ian Zaffino – Oppenheimer & Co.

Okay. Did you even have an idea what the magnitude is of that?

Maurice Taylor

No, because I've been muscled. If I give you anything right now, you know, there's somebody from England sitting on this phone call from a takeover panel trying to understand my explaining. Okay?

And then, we got the SEC that's listening to me too because, really, I'm under their jurisdiction until the Brits adopt me. Must we know, there not really going to adopt me because of my language so, I got to be a good boy.

Ian Zaffino – Oppenheimer & Co.

Alright and final question, here. Can you give us an idea of how many hours your test tire lasted and when it showed us better than expected, what do you mean by that?

Maurice Taylor

Well, when I say the better than expected, you see, what you end up doing is you – the raided load of this tire, in operation, is approximately 230,000 pounds load. And what your doing is as you have the sensors and this imaging so that, you from the frontal view, see the treads going over and it comes up, this things – the thermal imager puts right up there, down in the root of the log, you have a temperature that comes up. You also have the sensors inside to tell you the pressure, that tells you the temperature inside the cavity of the tire. So you've got the outside temperature, and you've got the inside temperature, and you got the air pressure, and then from the side, the same image would just going around. And when you have those steel belts that go there, it picks up the temperature of the heat, and you (indiscernible) that the eye expected then you run this at a certain number of hours, I'm not giving you out on a phone call all their secret stuff, but you have under the SAE, for all the other test, you have so long. So it runs at a certain amount of hours, and then it kicks the load up higher, and then it runs so many more hours, and what you're trying to do is you accelerate the heat, and the load, and the pressures, and you just keep accelerating this stuff. And what transpired is that you're going to then find out where the weakest point, and where a failure mode starts. And I expected this tire would have probably a few had expect the tire to last six months into a field condition before there would have been under severe conditions, and with last six months before it fail, this cost may should save, I'm not talking about sidewall failures or anything else where you, actually, broke down the connection joint between the belts and the carcass, the carcass never failed on this tire by the way, it was a belt separation. And we, probably would have got – if my friends mentioned a lot of rim, much of say, Or Bridgestone would have run six months. We were, probably, at the 4.5 to 5 months on the first shot. And we found what the mistake was, the assumption and what happen and so, we're going to correct that, I think, the next tire that we put up will exceed. So, the tire ended up going, where I would have been satisfied, was say the first failure at 40% or 50%. We ended up at 85%, that's pretty damn good, you know? Good. Now, that's excellent. Okay? That's like, baby, you know, say doing your first race car. Okay? At bad situation. So, that what happen.

Ian Zaffino – Oppenheimer & Co.

Alright. Thanks, Morry.

Maurice Taylor

Alright, Big Guy.

Operator

The next question comes from the line of Alex Blanton.

Alex Blanton – Ingalls & Snyder

Hello, it's Alex Blanton, Ingalls & Snyder. Morry, going back to what you – beginning of the call, and talking about the commodity price increases that are creating the boom in agriculture, and your own price increases and the steel prices increases. But I think that's one of the scariest scenario I've heard in a long time. It can't continue because, I hope, that Fed isn't going to allow it. So, I think there's going to be some events that occur that will work against that. And, I'd like to understand the – what the Company – what the Company would do if, for example, the ethanol subsidies were discontinued under Republican regime. And, the Fed tighten in order to prevent an inflationary boom from occurring. So, what would be your scenario under those conditions?

Maurice Taylor

Well, the first thing, I've publicly stated, the smartest thing here, let's take what we know, Alex. We know that if you go to South America, you know for a fact that the Brazilians have been producing ethanol. If you go down there and you go to a gas pump, you can get a gasoline that's 20% ethanol or you can get an 85% one. You know, when you – if you ever turn on – most of you in New York are not too big or in the East Coast, up in the upper part, are not great big Nascar race fans, okay. But, all your car races, they run on a, you know, alcohol. Now, let's stop and think about the farming. First thing is, you know, it doesn't cost a food shortage. And the reason being, is that you get the byproducts from ethanol, which is just like a supercharge feet. And, it doesn't affect the Mexicans or your food you eat because you eat sweetcorn which you don't use for ethanol. And it surely doesn't screw up with theaters and popcorn because that's different.

Number two. Is the big corn belt and what's going to happen is let's get rid of all the subsidies. Let's just make it a market barring deal but put 20% because it's pollution free. Everybody is worried about pollution. So, but just put 20%. I mean, come on give me a break. We don't want to drill for oil. You don't want refineries. We don't want nothing else, any place else but hell, you're just going to be paying for the oil. So, you're not going to run out of oil. It's just a better sense. Turn the farmers loose. Turn Montana loose. Don't have an area corner to be two foot and link and it look like great big huge green grapes at noon there because all ethanol is water, you know. The corn and a little yeast. You put heat to make it. So, it's all moonshine. And if you don't have, you really made the moonshine, it's supply probably better than vodka. So, I don't really, you know – but the guys that feed all of the BS in oil. Oil boys don't want you doing it either. You're gouging them because you bring the price of oil down.

Now, reference to Feds and the commodities. Hey, I'm old enough. I got enough gray hair. I know exactly what's going on. They've turned around and stopped and think about it. You got China. You got India. That's great. Everybody, they're sucking up the commodities but anybody that pegged their dollar to us which China did, by the way. So, pretty soon, you're going to break them. No difference. It happened in Russia. You probably own a (inaudible) and oil in Russia with the Sputnik and everything else. You looked at all that. Hell, I'm old enough to remember my cousin and all of them. Remember when I said, better red than dead, okay? There's so many Feds, the simple fact is, commodities, we are the best when it comes to growing their crop. Let's turn the farmers loose, it's about time. Is gold too high? Is oil too high? Is everything too high? Yes. Alright. What are you going to do? If you think that you're going to see oil down the $40 bucks a barrel in the next 18 months, if you think gold's going to $300, if you think copper is going back down to $0.85 a pound, then hell, you'd be the richest guy in the world, just short them all. Okay. But if it stays, if oil stays over $50 a barrel, if your copper stays over, let's just say, $2, then in the business that I do, that Titan does, which is tires and wheels, then those greedy little guys that are making those commodities are going to try to dig more to maintain the same level. Do you agree or disagree?

Alex Blanton – Ingalls & Snyder

Oh I agree with that.

Maurice Taylor

So? That's fine with me. Let's give them more tires, burn those suckers up. Make those machines work harder.

Alex Blanton – Ingalls & Snyder

All I'm saying is it's just a chance of the Fed, instead of easing further, it could start to tightened, that could hurt the PEs on the socks but clearly..

Maurice Taylor

Hey Alex. Let's give – I want to give you something to really worry about okay? Remember this, okay? Because everybody's running around, with the global warming, and all this other. Right now everybody on this phone call, everybody we're talking to, the earth is spinning one way at a thousand miles an hour, that means that's how fast you're moving around as the earth rotates on it's axis, but we're rotating around this sun at 64,000 miles an hour. We're really moving. And of course, the moon is what raises your tides up and down. So that's a powerful magnetic force. That's why our wind blows. And we're going to get hit every 100 years, we get hit with a decent sized meteorite, so that – will probably if it hits, it would take in a good little hit, just a concussion of the force will blow down everything within a good portion of any state in this country. So, if it hit New York, it will probably wipe out all of Manhattan up through Connecticut, everything else. Now that's just a pure fact. And that's going to happen whether it hits here, hits China, hits India, wherever it hits. I'll be damned if I'm worry about it. I've waited 40 years for this moment. So I'm going to enjoy it.

Alex Blanton – Ingalls & Snyder

Sounds good, Morry.

Maurice Taylor

You get too nervous, Alex. Get too nervous. Have a little drink. Bye bye.

Operator

The next questioning comes from the line of Roy Johnston.

Roy Johnston – Oppenheimer Capital

Hi, it's Roy Johnston. Apologized if you guys already have this earlier but I have to jump off for a moment. I just want to give the all understanding you said that the higher raw material prices and the startup cost on the offered tire, the mining tire, cost about 200 to 300 basis points a margin. Can you break that down between the two and how long you think it will take to get it back?

Maurice Taylor

Well, I think – I think, I'll get it all back this next quarter. Okay?

Roy Johnston – Oppenheimer Capital

Okay. And then, ongoing on the OTR side, I mean, you expect – expect some of those expenses to last until it rolls out in the September, October timeframe, or?

Maurice Taylor

Well, I think what's we stated that we're going to start shipping July 1st, for the big 63 inch. Okay, and whether its a 63 an the 57 inch, the margin in those products is absurd. I'm the first to tell you. Okay? I mean let's face it. They're absurd but why should I be any different?

Alright, when you push comes the shelf, and the demand, and lets face it. I'm going to tell everybody, what I'm going to do, its like everybody's saying, "Well, the other part of the business is softer and the OE, and the small OJR tires. That's right. But you know, when I go out and I say, "Here you want – you need 20 of the 63 or 24. The 63's, well, that's not bad, you know, that's a million box, but here folks, you're going to take an awful lot of these others too, because I used them. And we borrow and we approach some people. We're not going to have problem with that. And, we're the only ones they're going to have. Those still Belvid 63 inch. So all the extra are the one to take care of those supply and demand. So, its really a – its going to drag so much more.

Roy Johnston – Oppenheimer Capital

Great. Thank yo so much.

Maurice Taylor

You're welcome.

Operator

The next question comes from the line of Phil Volpicelli.

Phil Volpicelli - Goldman Sachs

Hi, Morry how are you?

Maurice Taylor

Pretty good, Bill yourself.

Phil Volpicelli - Goldman Sachs

Good. So with regard to the 63-inch tire, you got one in the bull wheel. When do we expect the results from the second bull wheel testing?

Maurice Taylor

Well, it takes, approximately, 10 days to run the whole cycle. So, I would expect the – they will have the first one, totally, cut up and dissected by the end of this week and, up in Brian. So, next week will slap – we already know, we're going to build two different ones and so, they'll be coming down the following week so that – our plan is to have the thing corrected and what we wish to do. So that, we can start shipping tires in June.

Phil Volpicelli - Goldman Sachs

Okay.

Maurice Taylor

We're trying to beat the July, you know, date by 30 days. And I think, we're going to do it.

Phil Volpicelli - Goldman Sachs

Okay. That's great. And just, logistically, on the Titan Europe situation. So, your shareholders have – do you have a shareholder meeting on the 15th of May, they need to vote to approve the nine.

Maurice Taylor

No, no, no, no, no. We do not even have the – there will be a proxy, another proxy that has to be put together and to meet the approval of the SEC. Hopefully, we will have – it will probably be, in my estimate, four more weeks from what they want put in. And they – once they approved it then I will go out and then the shareholders will have 30 days to approve it and then once the Titan International shareholders have approved it, then we can go and approach Titan Europe to negotiate an agreement and then, I'm assuming if that goes through their regulatory group, then there shareholders would vote.

Phil Volpicelli - Goldman Sachs

Got you.

Maurice Taylor

This could turn out to be like the U. S. Presidential election, you know. It could be a two-three year project. Who the hell knows, you know. That's nuts.

Phil Volpicelli - Goldman Sachs

And is there already – you – maybe you could answer this. But is there already a framework within which yourselves and Titan Europe have agreed to in terms of what – -

Maurice Taylor

We can't do that. That's illegal because you can't do that.

Phil Volpicelli - Goldman Sachs

Okay.

Maurice Taylor

All right.

Phil Volpicelli - Goldman Sachs

Okay. And then in terms of the one time project there's a million – the training cost, I think you touched on that earlier – those probably continue and then there was a million of extra professional fees. What are those? Are those related to the Titan Europe approach on the proxy? Or was that normal course of business?

Maurice Taylor

I think, there is a normal – there was an extra million of charges and professional fees.

Phil Volpicelli - Goldman Sachs

It's just – -

Kent Hackamack

We're not going into that. That's just normal professional fee.

Phil Volpicelli - Goldman Sachs

It's just normal, Kent. Not exceptional?

Kent Hackamack

We cant speak to that right now because as Maurice said, we've got – we can't speak of it given the takeover of Titan on the SEC.

Phil Volpicelli - Goldman Sachs

Okay. That's fine.

Kent Hackamack

No problem.

Phil Volpicelli - Goldman Sachs

And then in terms of the margin, when I look at – say there was an 80 basis point increase year-over-year the first quarter but you were hit with raw material cost and if I heard you correctly Morry, you think that you'll be able to get those raw material costs back through price increases in the second-quarter. So, we should be expecting a reasonably strong increase in gross margin in the second-quarter. Is that accurate?

Maurice Taylor

I would – I would say we're going to just go up. That's what our plan is, alright. Now, remember what I said earlier because both the SEC and the takeover panel – I can talk about anything backwards unless we're stuck about anything going forward. But, I would assume, alright, from what we have done and what we have put forward and the price increasing and what we have done, that we will have a – our margins are moving forward to where we have previously set that we wish to get to.

Phil Volpicelli - Goldman Sachs

Got you. Understood. Thank you very much.

Maurice Taylor

It's a great year, okay.

Phil Volpicelli - Goldman Sachs

Yup, thank you very much. Good luck.

Maurice Taylor

You're welcome.

Operator

The next question comes from the line of Shannon Collins [ph].

Shannon Collins

Hi, Morry. How are you doing?

Maurice Taylor

Pretty good. How are you today?

Shannon Collins

I'm good. Quick question, the settlement charge that you had or I guess it was income of a $1 million. Can you tell me what that was all about?

Maurice Taylor

That's under our confidentiality agreement.

Shannon Collins

Okay. But, it was – it was a $1 million, obviously, that you're not going to get every quarter? Okay. Morry, I've been a big fan of yours ever since you run for president, back in 96. But, I am a little bit concerned. I see kind of tighten in the eye of a perfect storm. You've got the highest commodity prices in the history of the financial markets. You got the lowest interest rates. You got the weakest dollar, and yet, you got the highest sales, and yet your income, this quarter, is the lowest that its been on a per share basis in the last four years. And, I guess, my biggest question is, if you can't make the money now, when the conditions are at the absolute peak from all stand points, when can you make the money?

Maurice Taylor

Well, as I've stated many times before, you turnaround and why did I start this conference call on. What do we do in the first quarter, we built the 63-inch, we built the bull wheel. Alright? We didn't have to do any of that and you'd all be giggling gag over how much money we would have made. If you wouldn't have been doing this and we would have sat and waited and.

Shannon Collins

But I didn't hear – I didn't hear any more add backs this year, like I heard $23 million of them last year and the year before. I guess, my question is, the first quarter is always the best quarter of the year both in terms of sales and profitability. If you go back three years, you have $0.44 a share, then $0.38, then $0.42 and now, we're $0.29.

Maurice Taylor

Now, is going to see have – there just going down, down, down, down. Right?

Shannon Collins

Yeah, and.

Maurice Taylor

But now, stop.

Shannon Collins

(inaudible) first quarter and then, not only that, but the first quarter is always the best quarter of the year. So now, we got the weakest fourth – first quarter that we've had in four years and now, we're tailing off into the weakest parts of the year, which are the second, third, and the fourth quarter which ever year, they going to down from there. So, I guess, (inaudilbe).

Maurice Taylor

Here, let me just back you here. First thing is that, everything you're looking backwards and you're right. Everything you just said, but you also stopped and said you're looking at the perfect storm. Alright? And the perfect storm is what? When do you start production of a 63-inch? You start that in the third. But what's happened with the farm business, as you've seen it in the past – as in the past, it always went down so that come June, you were tailing off because the farmers were out there, and they're just waiting for the harvest. So then the harvest starts to pick up. I believe that is a correct summation. In the tire business and the previous, you would start in May, next week – next week you would start producing combined tires that you would sell for the fall. But this year, there is no way you're going to be able to produce Combine tires in May or June because for the active market, because you're going to be producing all that big stuff for the OEs. And so what you've seen, and what I tried to convey is what you've seen in the past, that you can go back to 1995. You got to go back to 1995. That's how long this suckers been sitting there. And now the perfect storm is going to hit. So number first quarter, and if you go back to my previous conference calls, which I can't say anything now because I'm being muzzled, but if you go back and look at the previous, in what I stated, I think, you'll see that it's going to happen. I'm looking for a great second quarter.

Shannon Collins

Well.

Maurice Taylor

And then, you turn that 63-inch on and just look at what that jumps to your sales level. We've already, previously stated, we're going to try our situation is, production going in, and we've laid it out, in previous calls, and everything, the 150 of the 63 is what we're going to have production ramping up until the end of the year. And then, it's going to be able to start in '09 at the 500 a month.

Shannon Collins

Got it. So...

Maurice Taylor

Okay. So, you go back and you look. I'm not disagreeing with you in the back but I'm looking for, I've waited a long time to see the farm hit the way it's hitting. So...

Shannon Collins

I guess, my problem is that, you know, you see cases in Holland, they miss their first quarter bad. The question is...

Maurice Taylor

But, wait a minute. Wait a minute.

Shannon Collins

With quarter.

Maurice Taylor

Okay, were not talking cases in Holland. Now, were going to give you a little quick here. First thing is, case in New Holland, most of their staff, you know, is overseas. So they got a currency whack right off the bed. No different in, what our friends at Adco. You look at mother dear, mother dear is not missing they're cranking. And most of that capacity that they have, is in the U. S., alright? If you're going to ship machinery in, to resell over here, you're going to get hit. If you also look at the case in New Holland, they tell you that their market share didn't move, alright? But there percentage, and they looked at the tractor and combined business has been flat. Very little. Well, but yet you grow read into it, their U. S. Volume is up 30 points, so then you go look, their other places in the world are not. So, but now go look at mother Deere, and you look at where the yag is..

Shannon Collins

I guess that's my whole point, and she look at Deere, we've got a weak dollar, our Deere's doing well, so you would think that if Titan is supplying Deere, that Deere would be – that Titan would be doing just as well, and what we've got is, you missed the fourth quarter, you missed the first quarter, and you keep telling us that it's the next quarter and the 63-inch tire, and I just, I guess I'm concern that by the time you actually get to where you think you're going to go, you're going to be going, that all this is gone. So I understand what you're saying and I appreciate that it's not this quarter, and it's not last quarter but it's next quarter, and the next quarter, and next quarter, but I'm a little bit concern that the profitability they were seeing in other industries, and also seeing in your sales line is not showing up on the bottom line. And with that I'll end my question.

Maurice Taylor

Well, that's – I appreciate your critique of it and the only thing I would say to you is that you've seen the size on the sale side, and your theory is a little bit from a manufacturing side, off from the standpoint. You don't keep growing, and just turn around, and maximize your profit. It just don't happen, okay? I can appreciate that some theorist might say it happen but you can't grow, you can't put the stuff in it, you can't do the stuff and at the same time have all the efficiencies that you think you wish as you grow. And, it just don't happen. And, you know, that's just the fact. So,

.. Okay. Thank you.

Maurice Taylor

You're welcome.

Operator

The next question comes from the line of Jeffrey Sue [ph].

Maurice Taylor

Hello, Jeffrey.

Jeffrey Sue

Yes, sorry. All of our questions have been answered. Thanks, Morry.

Maurice Taylor

You're welcome.

Operator

And, the next question is from the line of Jimmy Young [ph].

Jimmy Young

Hi. Two questions. First is that, for this current quarter, can you give us sense as to how much of the sales of the 253 million in sales were from the U. S. Versus outside the U. S.? And, given your focus outside the U. S., how do you see that changing over the next couple of quarters?

Maurice Taylor

I would say I don't have the number from our quarter. But, I believe in the past, we were exporting approximately pretty close to about 50. Right around about 50 million was our total in export of our sales level. And hopefully, we can more than double that as we go forward.

Jimmy Young

Okay, great. And then secondly, regarding the, you know, moving the equipment that you had mentioned from Bronx to Demoin in Freeport. Will there be any production losses in other products that we should be aware of, on the one hand? And then secondly, how much in cost will be incurred in the – in the June quarter to make this – to make that happen?

Maurice Taylor

Well, that's in the capital that we already went out publicly last year and stated what we thought it would be in the range. It's not going to affect our production. We've – because what we did in this situation is we went out and contracted with outside contractors. And the equipments being put in were at – has no bearing on the current production that we're running. So, we..

Hello..

Operator

It does appear that he hung up. Just one second. Next one will be from Wayne Moore [ph].

Wayne Moore

Hi guys thanks for getting back on the call. I have a couple of questions. Really probably two main ones; the first thing Maurice is looking at the cash flow statements which is something I tried to focus on beyond net income, free cash flow which I look at as operating cash flow less capital expenditures, was a negative $12 million or well above that. That – the lowest or the biggest cash put on the Company’s hat in the last five quarters, so if you were to protect that forward with your existing cash of $47 million and that’s about four quarters of available cash you have before you have to do some sort of a equity or a debt financing and I know in dealing with other manufacturing companies if the 63 inch tires do come to fruition as you say, your going to have a big working capital kind of build there that would be a cash strength, so and my first question is are you planning for that? What kind of a capital raise would that be and have you kind of gone out to the debt markets to see what that would look like.

Maurice Taylor

Now, first thing is that number one as I states, the margins on the 63, they were so large it’s obscene alright and what happens today, in that market we have mining companies that are so full of cash so when you go with the 63 inch tires and you ship six of them for a truck, that’s 300,000. You get your 300,000 when you ship them, alright. So and at the same time your doing that –

Wayne Moore

I mean correct me if I am wrong, but you have to buy all the raw goods and those materials and then go through the manufacturing process. So I mean I am hoping when your team is modeling that, they are building in some sort of a working capital thing. I mean that’s got to happen unless your not paying your suppliers.

Maurice Taylor

No, no but what happens to me. We pay our suppliers, our suppliers are paid very well and if you look the first thing is you spent the 20 some mill is what you spent in the first quarter, so I have paid those suppliers on the equipment and then your going to be in 60 days , your going to start producing these tires.

Wayne Moore

Alright.

Maurice Taylor

Alright. And if your margins and I am not going to get into where the margins is, but if you look at how much that margin is and you look at what’s happening right now referenced to the cash flow that your going to generate from your other business references your pricing and everything else, your going to – I’ll say you’ll move through this year, your inventories are going to drop. So contrary to where you believe your going to run out of the cash, I believe it’s going to go just the opposite and we’ll start generating the cash in a very large way as this year starts to unfold.

Wayne Moore

So next quarter should we expect continued cash drain or should we – I mean what are you thinking about going forward?

Maurice Taylor

Well, I am thinking that the way that this moment the cash going forward is not going to be a problem for tightening at all.

Wayne Moore

Okay, I guess we’ll just have to see how that plays out over the next few quarters then. Right now I have one other question on the – in your 10-K and your proxy statements and your 10-Q, consistently and I have gone all the way back to ’95, there’s been a disclosure about companies that are related to you. Now lets say in the most recent quarter there was almost $5 million to $6 million in sales of companies related to you in addition to missions paid and to the turn around two million, typically when companies have kind of a CEO related party transaction often times I see they disclose the name of what the company is so due diligence can be done on that company, so I guess what I am asking is what are those companies? Are they run by your relatives or they run by someone you know. I mean what exactly….

Maurice Taylor

Since you went back all these years, yeah, it is my brother, my brother Fred Taylor. Now that is FBT enterprises which he has a sales force, some sales reps…

Wayne Moore

What is that FTB Enterprises?

Maurice Taylor

FBT Enterprises and then there is another as I think he has called Black Stone and he has a fair amounting and he supplies the irrigation people and they also buy tires that they turn around and they sell, so that’s always been of the disclosed where, what and how. Well, that’s what that is.

Wayne Moore

The numbers were disclosed, but at least gone back as far as I can find, none of the companies were disclosed. So, now there wouldn’t be another businesses related to you that received sales?

Maurice Taylor

No.

Wayne Moore

What about OPR Wheel Engineering?

Maurice Taylor

That’s him, that’s one of his companies.

Wayne Moore

So that’s in addition to FBT and Black Stone?

Maurice Taylor

Well, it’s either it’s OPR – I think he has – one he has set up for his sales. OPR tires into it, is like selling construction liners. The other Black Stone is something that he has but in the – to my knowledge is in the mining business and then he has his rep business.

Wayne Moore

Now his businesses are completely unrelated to Titan as far as…

Maurice Taylor

Well, they are unrelated. In fact if I wasn’t the CEO alright then they would never show up.

Wayne Moore

So the business relationships are some what your saying standard. I am going back all the way to ’95 and so in ’95…

Maurice Taylor

You can go all the way back to where we were private, you can go all the way back into the 80’s okay.

Wayne Moore

Right.

Maurice Taylor

And then a brother that got killed with our Chief Engineer, that was in the end of ’97, that was my brother Burt and they were both – they were in business together.

Wayne Moore

Right. Well, I go back to I guess it is ’94 which is the farthest I have disclosures on that and the company did his related companies had roughly $3 million in sales for the year ‘94 and at the end of the period they have roughly over $2 million in receivables that they owe to Titian. So, I mean it’s pretty easy Math, that’s a very, very high percentage of receivables to sales. Is that a standard type deal that you have with all of your ?

Maurice Taylor

Your talking numbers that I don’t know and when you look at the sales numbers and you look at what it is I have no idea what you’re trying to get to, so they are all disclosed there, so you tell me what the alternative method is.

Wayne Moore

Would you have a Company that you sell to that 75% of your sales would be financed by receivables at any given time. I mean it’s ?

Maurice Taylor

Well, I don’t know what you are looking at and what it is in reference. If it was something that we needed to sell at that time, you are way off pace on this. I have been rolled, looked at tattooed and everything else so I have no idea what time, where, what or how, so get whatever your point is, your point is quite that has nothing to do with this reason for this call. You are onto some other venue okay. Your more I take a lot of calls, I have been on this for an hour and a half, so.

Wayne Moore

Well let me first ask.

Maurice Taylor

You can ask I don’t care what you ask okay I am just telling you, you are not liking and this is not a deposition so.

Wayne Moore

No, but it’s a public Company isn’t it?

Maurice Taylor

It’s a public Company, it’s all stated. I have been when I had a strike it went through for 4 years so hey I understand. So it’s nice chit chatting but I got other share holders and truthfully I doubt if you are a share holder, okay. So, let the share holders ask the questions. If you want to know something else you’re information has to come from some other place all right, so I am just being honest about it okay.

Wayne Moore

Yes, thank you sir.

Kent Hackamack

Sir?

Wayne Moore

Yes?

Kent Hackamack

First it’s our account.

Wayne Moore

Okay.

Kent Hackamack

If you like in our 10K you can see that they had sales of 5.1 in 2007 when we had a receivable of a little over 0.2 million, so I don’t understand your question of $3 million to $2 million?

Wayne Moore

Basically you’re talking about which year?

Kent Hackamack

If you look at '07, '06 and '05.

Wayne Moore

I am going back to your initial filings to see how these kind of related companies were able to finance the…

Kent Hackamack

Your not talking to a share holder you are talking to somebody who has got something for whatever reason, whoever, however so. Well that’s not our problem.

Wayne Moore

I just want to get into…

Maurice Taylor

You can write it down on a letter and send it, okay it’s all out it’s all there so I don’t see.

Wayne Moore

One last question Maurice and I’ll promise I’ll get off and that is going back to your acquisition out of bankruptcy that Nakaduchess. I looked at the following for the company and the board had two members with the last name of Taylor; yourself and Fred Taylor and this is at the time where initially Titian acquired a portion of the assets out of bankruptcy and then eventually acquired all the assets out of bankruptcy. Was Fred Taylor ever an owner of any of those assets that Titian brought out of bankruptcy?

Maurice Taylor

Now the question is from where now? That’s posted with…where the hell is that?

Wayne Moore

Well you have a subsidiary and you were on the board also from at manufacturing company based in Nakaduchess Mississippi. Your file name is with the statement …

Maurice Taylor

Now I – okay, okay counsel because you got be something but now are you in this? Are you off on a deal, are you trying to say Nachuss?

Wayne Moore

Yeah or Nachuss sorry not Nakaduchess I am sorry.

Maurice Taylor

Well, let’s get to – this is like writing a book or something. I don’t even know what you are talking about.

Wayne Moore

What I am asking that how is the stand with both – with that state in the state of Florida for that company they added …

Maurice Taylor

You are talking about old times here …

Wayne Moore

And you bought it from your brother.

Maurice Taylor

I have no idea what part of what you are talking about unless it’s a condier transaction.

Wayne Moore

Yes it’s the Condier transaction.

Maurice Taylor

Okay, so.

Wayne Moore

Which became Machuss but.

Maurice Taylor

Well okay, I would assume at that time there was another person that was a share holder and her name was Kenz and I went through a federal court battle with them Okay, so there is federal records I think so. So go look at all the federal records and then you’ll find everything. In fact I think there was 10 charges and I think we won all 10 and if it’s your talking to me I have the just sick feeling that all of this has to go back to my friends at GPX which is Kenz’s which and so while you are talking on the call and you must be a little careful because you might be scared of violating some SEC rules, but that’s your problem and not that’s not mine.

Wayne Moore

What SEC rules are those?

Maurice Taylor

Well you are a counsel and so you go looking, you are surely not a share holder. So I wish you all the best.

Wayne Moore

But you still didn’t answer my question which is why you have not added (Cross Talk)

Maurice Taylor

I didn’t answer your question and I am not going to answer your question because it’s going all the way back into well whenever hell that thing was back in the year 90s. Let us now complete with this call. You want something send it writing. Okay Randy.

Wayne Moore

All right.

Operator

The next question comes from the line of Peter Gutridge [ph].

Maurice Taylor

Hello, Peter.

Alfred Charles

Hi this is Alfred Charles [ph] for Peter. Just a quick question did you say that perhaps you can (inaudible) drying tiers in a faster run rate perhaps a month early so it actually see some shipments or revenues in the second quarter?

Maurice Taylor

Yeah there will be a few I don’t think it’s at it’s in the range of what I am just saying this is what we are trying to do. We are trying to get it out. I would like to see it out 30 days ahead but I am not going to put a stake in the ground.

Alfred Charles

All right thanks.

Maurice Taylor

You’re welcome.

Operator

The next question comes in line of Matt Channing [ph].

Matt Channing

Yes, hi this question may be for Kent. In the 10-Q it says the raw material cost were up about $5 million or $6 million for the quarter I given that I thought that raw materials were about 50% of your cost it’s actually a smaller number than I though given what steel and oil was in first quarter. Could you maybe talk a little bit better about how your managing the – through this industry infaltionary environment?

Kent Hackamack

Well, I think more that run through we are trying to get ahead of the curve a little better at least get even on the raw materials that’s what we felt we weren’t to recover to get our margins where they need to be.

Matt Channing

Yeah but could do something with the math because it seems like I was expecting a much larger increase given I mean is that correct that raw materials are about half of your costs?

Kent Hackamack

Well as Maurice said before that can vary but we are able to cover some of that as Maurice mentioned so.

Maurice Taylor

Your material costs could help out here. When you have a small tier it depends on your mix. The smaller the tier the less material and the more labor you have. The larger the tier the more material costs and the less labor cost goes into it. So you have on certain tires you can go and you can end up with like up to 65% can be a material cost. Whereas on some of the smaller tiers you can be down to the I would say probably anywhere from 35 to 40%. It’s your product mix.

Matt Channing

So on a blend if this is?

Maurice Taylor

Pardon me?

Matt Channing

On a blended basis would you say a 50% number is about right or it really does jump around from quarter-to-quarter?

Maurice Taylor

It’s going to vary a little bit. It will vary it. Well, actually material cost as you go into this much larger stuff material cost will be, will come up a little bit bigger on the tier side. The its almost the same thing to when you get into the wheels and you spin around with the steel. There is no question the materials coming up a bigger factor and how you manage it and to where you get your margins up. I mean the material if you look at the price of material you look at the lets just look at steel. Steel as of May 1, is going to be pushing almost $800 a tone, that’s in my life time that’s like unheard of. So you have the situation where it’s going to last, how do it know but it’s going to shove it up so this was 3 months ago. There’s nobody in the world that could have forecasted that. You have got natural rubber now it’s going to hit a 132 bucks or something like that per pound so I mean you are looking at some cost that truthfully if we hit the same setup right I think they are going to sit at this area and I am not worried about the I don’t believe the commodity boom is going to all of a sudden just drop off to face severance. I think it will stick around but that’s just what I see so time will tell, alright.

Matt Channing

Okay thanks.

Maurice Taylor

Thanks. I am going to take two more calls.

Operator

It actually appears that that was the last question.

Maurice Taylor

Great, I can get off the cell phone. Have a great day. Thank you everyone. Bye.

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