Q4 2021 Timken Co Earnings Call

Speaker 1: Please, Dan, bye. We're about to begin.

Please standby we're about to begin.

Good morning, My name is Paula and I will be your conference operator today as a reminder, this call is being recorded.

Speaker 1: Good morning. My name is Paula, and I will be your conference operator today. As a reminder, this call is being recorded. At this time, I would like to welcome everyone to Tim Kim's fourth quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.

At this time I would like to welcome everyone to Timken sport quarter earnings release Conference call all.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

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Speaker 1: Thank you. Mr. Fraunhappel, you may begin your conference.

You Mr Front Apple you may begin your conference.

Thanks, Paula and welcome everyone to our fourth quarter 2021 earnings Conference call. This is Neil thrown Apple director of Investor Relations for the Timken Company. We appreciate you joining us today.

Speaker 2: Thanks Paula, and welcome everyone to our fourth quarter, 2021 earnings conference call. This is Neil Fronapple, director of investor relations for the Timkin Company. We appreciate you joining us today.

Speaker 2: Before we begin our remarks this morning, I want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results.

Before we begin our remarks. This morning, I want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results.

Speaker 2: You can also access this material through the download feature on the Earnings Call webcast link.

You can also access this material through the download feature on the earnings call webcast link.

Speaker 2: With me today are the Timkin Company's president and CEO , Rich Kyle, and Silfor Costa, our chief financial officer.

With me today are the Timken company's president and CEO , Rich, Kyle and Phil for Casa our Chief Financial Officer.

Speaker 2: We will have opening comments this morning from both Rich and Phil before we open up the call for your questions.

We will have opening comments this morning from both rich and Phil before we open up the call for your questions.

Speaker 2: During the Q&A, I would ask that you please limit your questions to one question and one follow up at a time to allow everyone a chance to participate.

During the Q&A I would ask that you. Please limit your questions to one question and one follow up at a time to allow everyone a chance to participate.

Speaker 2: During today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the FCC, which are available on the Timken.com website.

During today's call you may hear forward looking statements related to our future financial results plans and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the FCC.

Which are available on the timken Dot com website.

We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials.

Speaker 2: We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials.

Speaker 2: Today's call is copyrighted by the Timkin Company, and without express written consent, we prohibit any use, recording, or transmission of any portion of the call.

Today's call is copyrighted by the Timken company without express written consent, we prohibit any use recording or transmission of any portion of the call.

Speaker 2: With that, I would like to thank you for your interest in the Timkin Company and I will now turn the call over to Rich.

With that I would like to thank you for your interest in the Timken company and I will now turn the call over to rich.

Yeah.

Thanks, Neil Good morning, and thank you for joining us today.

Speaker 3: The fourth quarter was consistent with the trend that we saw early in 2021 and that ran through the full year.

The fourth quarter was consistent with the trend that we saw early in 2021 and that ran through the full year with.

Speaker 3: with strong revenue across most end markets and geographies.

With strong revenue across most end markets and geographies.

Speaker 3: Rising costs particularly in steel and logistics.

Rising costs, particularly in steel and logistics.

Speaker 3: and an abnormally high amount of inefficiencies across our operations from labor and supply chain challenges.

And an abnormally high amount of inefficiencies across our operations from labor and supply chain challenges.

Speaker 3: The result was revenue of $1.01 billion and earnings per share of 78 cents.

The result was revenue of one point or $1 billion and earnings per share of 78 cents.

Revenue was up 13% from 2020.

Speaker 3: Revenue was up 13% from 2020 and up 10% for the prior fourth quarter record.

10% for the prior fourth quarter record.

Speaker 3: We delivered this revenue growth despite continued supply chain and operational challenges.

We delivered this revenue growth despite continued supply chain and operational challenges.

The revenue strength was broad based and orders were also strong across almost all markets.

Speaker 3: The revenue strength was broad-based, and orders were also strong across almost all markets.

Speaker 3: Backlog grew despite the record level of shipments and is up significantly sequentially and over prior years.

Backlog grew despite the record level of shipments and is up significantly sequentially and over prior year.

Ramping up to meet the demand continue to require a significant cost premium.

Speaker 3: Ramping up to meet the demand continue to require a significant cost premium.

Speaker 3: costs increased further in the quarter and price cost remained negative.

As costs increase further in the quarter and price cost remain negative.

Price was up both year on year as well as sequentially in the quarter and contributed modestly to the revenue growth, but lagged the cost increases.

Speaker 3: Price was up both year on year as well as sequentially in the quarter and contributed modestly to the revenue growth but lagged the cost increase.

Speaker 3: Result was a year on year to climb in margins of 280 basis points and a decline in earnings per share of 7% for the fourth court.

Result was a year on year decline in margins of 280 basis points and a decline in earnings per share of 7% for the fourth quarter.

Speaker 3: For the full year of 2021, Timkin delivered record revenue of $4.1 billion, which was an 18% increase over 2020 and a 9% increase over 2019, the prior high mark for revenue.

For the full year of 2021 Timken delivered record revenue of $4 $1 billion, which was an 18% increase over 2020, and a 9% increase over 2019, the prior high Mark for revenue.

We delivered strong revenue levels, despite significant challenges with supply chain, including labor shortages transportation delays and material shortages.

Speaker 3: We delivered strong revenue levels despite significant challenges with supply chains, including labor shortages, transportation delays, and material shortages.

Speaker 3: The growth was driven by robust industrial demand across most end markets and was boosted further by our outgrowth activities, including delivering a fourth consecutive year of double digit growth in renewable energy, and a 12th consecutive year of completing at least one acquisition.

The growth was driven by robust industrial demand across most end markets and was boosted further by our outgrowth activities, including delivering a fourth consecutive year of double digit growth in renewable energy.

<unk> consecutive year of completing at least one acquisition.

Speaker 3: Our focus in 21 on responding to our customers demand and increase in our market position did come with a significant cost premium. Cost increase sequentially each quarter.

Our focus in 'twenty, one on responding to our customers' demand and increasing our market position did come with a significant cost premium.

Costs increased sequentially each quarter through the year.

Speaker 3: The primary drivers were steel, logistics, and supply chain officials.

The primary drivers were steel logistics and supply chain inefficiencies.

Speaker 3: The challenges ranged from higher the normal absenteeism and on-boarding costs within our plants to transportation the ways material shortages and premium costs associated with securing supply.

The challenges ranged from higher than normal absenteeism, and onboarding costs within our plants to transportation delays material shortages and premium costs associated with securing supply.

Speaker 3: Price cost went mostly negative early in the year and by the second half had a significant impact on margin.

Price cost were modestly negative early in the year and by the second half had a significant impact on margins.

Our price realization in 'twenty, one lagged the cost increases and magnitude and timing due to a combination of factors.

Speaker 3: Our price realization in 21 lagged the costing precess and magnitude and timing due to a combination of factors.

Speaker 3: that included contractual commitments as well as inflation exceeding our expectations.

Including contractual commitments as well as inflation exceeding our expectations.

Speaker 3: We began increasing prices in the second quarter of the year and price realization increased sequentially each month from April through December .

We began increasing prices in the second quarter of the year and price realization increase sequentially each month from April through December .

Speaker 3: Price for the year was up under 1% in margins for the year, declined by 140 basis points as the negative impact of costs more than offset the benefits of increased revenue and price.

Price for the year was up under 1%.

Margins for the year declined by 140 basis points as the negative impact of costs more than offset the benefits of increased revenue and price.

Despite the supply chain challenges and rapid increase in cost Timken did deliver record earnings per share of $4 72 and 2021.

Speaker 3: Despite the supply chain challenges and rapid increase in costs, Timken did deliver record earnings per share of $4.72 in 2021, and we were positioned for another record year in 2022.

And we're positioned for another record year in 'twenty two.

We added 5% more employees to our global plant staffing levels through the course of the year.

Speaker 3: We added 5% more employees to our global plant staffing levels for the course of the year.

Speaker 3: We also added inventory to serve increased customer demand and to accommodate for supply chain issues.

We also added inventory to serve increased customer demand and to accommodate for supply chain issues.

Speaker 3: We made progress on mitigating internal and external supply chain constraints and inefficiencies and we expect productivity gains in 22.

We made progress on mitigating internal and external supply chain constraints and inefficiencies and we expect productivity gains in 'twenty two.

Speaker 3: We have negotiated or implemented pricing increases for much of the portfolio, which will be evident in the 22 results.

We have negotiated or implemented price increases for much of the portfolio, which will be evident in the 'twenty two results.

Speaker 3: We enter 2022 confident that price realization will be significantly higher than it was last year.

We enter 2022 confident that price realization will be significantly higher than it was last year.

Due to strong markets, our rapid response to the increase in demand and our outgrowth initiatives. Our backlog grew significantly through the course of the year and we were well positioned to deliver another year of double digit topline growth.

Speaker 3: Due to strong markets, our rapid response to the increase in demand, and our outgrowth initiatives are backlog-gruously significantly through the course of the year, and we're a well-positioned to deliver another year of double-digit top-line growth. During the year, we have-

During the year, we executed well against our long term strategy.

Speaker 3: It completed the acquisition of IMS, strengthening heart linear motion offering and robotic.

We completed the acquisition of IMS strengthening our linear motion offering in robotics.

Speaker 3: We continued our investment in our digital platform with the elimination of two legacy ERP systems.

We continued our investment in our digital platform with the elimination of two legacy ERP systems.

Speaker 3: We'd advance to our footprint, the closure of a facility in Italy, the opening of a facility in Mexico, and the investment of $150 million in CAPEX, including the advancements of our previously announced $75 million investment in renewable energy.

We advanced our footprint with the closure of a facility in Italy, the opening of a facility in Mexico.

The investment of $150 million in Capex, including the advancement of our previously announced $75 million investment in renewable energy.

'twenty, one capex will help us achieve new levels of revenue in 'twenty, two as well as mitigate the cost and labor issues that we faced last year.

Speaker 3: 21 CAP-X will help us achieve new levels of revenue in 22, as well as mitigate the cost and labor issues that we faced last year.

We continued to deliver financially and strategically on our acquisitions, including the 2019 acquisition Becca lubrication systems.

Speaker 3: We continue to deliver financially and strategically on our acquisitions, including the 2019 acquisition of Becca lubrication systems.

Speaker 3: Despite the challenges from the pandemic and the supply chain issues, which started within a few months of closing, we continue to deliver synergies and value from the back acquisition.

Despite the challenges from the pandemic and the supply chain issues, which started within a few months of closing we continue to deliver synergies and value from the Beck acquisition.

Speaker 3: We have completed integration of Gronevell and Becker's management teams, product lines, and sales forces, we've invested in and launched new products that are being well-received by the market, and we've advanced the footprint, including the closure of our manufacturing operation in the U.K. and the expansion of our operations in the U.S. and China.

We have completed integration of groeneveld and back as management teams product lines and sales forces, we've invested in and launched new products that are being well received by the market.

Vance the footprint, including the closure of our manufacturing operation in the U K and the expansion of our operations in the U S and China.

Speaker 3: We continue to pursue M&A opportunities and we expect our M&A activity to increase in the next couple of years.

We continue to pursue M&A opportunities and we expect our M&A activity to increase in the next couple of years.

Speaker 3: We did the year with a strong balance sheet and would expect capital allocation to be a significant contributor to our results in the coming years.

We ended the year with a strong balance sheet and would expect capital allocation to be a significant contributor to our results in the coming years.

Speaker 3: We also advance our corporate social responsibility program in the year and our Tim continue continues to prioritize employee safety and employee diversity giving back to our communities and advancing environmental sustainability in our operations and through our products.

We also advanced our corporate social responsibility program in the year and our Timken team continues to prioritize employee safety and employee diversity, giving back to our communities and advancing environmental sustainability in our operations and through our products.

Speaker 3: As a result, Timkin was once again recognized as one of America's most responsible company.

As a result timken was once again recognized as one of America's most responsible companies.

Speaker 3: Turning to the 22 outlook, we are guiding to 10% revenue growth across the portfolio.

Turning to the 22 out what we're guiding to 10% revenue growth across the portfolio.

Speaker 3: 10% is comprised of 7% volume, 4% price, and negative 1% current.

10% is comprised of 7% volume.

4% price and negative 1% currency.

We're expecting almost all markets to be up at least mid single digits.

Speaker 3: We're expecting almost all markets to be up at least mid single digits.

Speaker 3: As I mentioned earlier, our backlog to start theater is high, order flow is strong, customer sentiment is bullish, our growth pipeline is robust.

I mentioned earlier, our backlog to start theater is high order flow is strong customer sentiment is bullish our growth pipeline is robust.

Speaker 3: and our production, plant staffing and inventory levels are all up.

And our production plant staffing and inventory levels are all up.

Speaker 3: We are still dealing with various supply chain issues, but we are off to a good start to achieving the 7% volume growth. And we have the backlog and momentum to support the revenue outlook for the full year.

We're still dealing with various supply chain issues, but we're off to a good start to achieving the 7% volume growth and we have the backlog and momentum to support the revenue outlook for the full year.

On the 4% price the actions needed to achieve this level have already been implemented or negotiated and we are confident that we will realize at least 4% this year.

Speaker 3: On the 4% price, the actions needed to achieve this level have already been implemented or negotiated and we are confident that we will realize at least 4% this year.

Speaker 3: The majority of the pricing is in effect today, so it will be evident in the first quarter results.

The majority of the pricing is in effect today, so it will be evident in the first quarter results.

We're also guiding to $5 to $5.40 of earnings per share, which would be up about 10% at the midpoint with EBIT margins of about 17%.

Speaker 3: We're also guiding to $5 to $5.40 of earnings per share, which would be up about 10% at the midpoint, with EBITDA margins of about 17%.

Speaker 3: In those estimates, we are assuming that the increased cost levels we experienced in the second half of 2021 hold for the full year of 2022.

And those estimates we are assuming that the increased cost levels, we experienced in the second half of 'twenty one hold for the full year of 'twenty two.

Speaker 3: That is what we are experiencing to start the year. We believe we've been conservative in our cost assumptions. We're including market, inflationary, and manufacturing costs.

It is what we are experiencing to start the year. We believe we've been conservative in our cost assumptions, we're including market inflationary and manufacturing costs.

Speaker 3: But the supply chain situation remains very dynamic, and the range of possibilities remains wider than normal.

But the supply chain situation remains very dynamic and the range of possibilities remains wider than normal.

Speaker 3: We remain very focused on both mitigating the supply chain costs and recovering costs with price.

We remain very focused on both mitigating the supply chain cost and recovering cost with pricing.

In summary, we expect to deliver record revenue and record earnings per share and 22 in what remains a robust, but very choppy industrial market expansion.

Speaker 3: In summary, we expected to deliver record revenue and record earnings for share in 22 in what remains a robust but very choppy industrial market expansion.

Speaker 3: and we will do it while continuing to advance and grow our market position as a diversified industrial leader, creating long-term value for all stakeholders. Phil? Ok.

And we will do it while continuing to advance and grow our market position as a diversified industrial leader, creating long term value for all stakeholders.

Phil.

Okay.

Okay. Thanks, Rich and good morning, everyone for the financial review I'm going to start on slide 12 of the presentation materials, which includes a summary of our results.

Speaker 4: For the financial review, I'm going to start on slide 12 of the presentation materials, which includes a summary of our results.

Revenue in the quarter was just over $1 billion instead of timken record for the fourth quarter.

Speaker 4: Revenue in the quarter was just over a billion dollars and set a Timkin record for the fourth quarter.

Speaker 4: Sales were up 13% from last year, and up more than 10% from the fourth quarter of 2019.

Sales were up 13% from last year and up more than 10% from the fourth quarter of 2019.

Speaker 4: We delivered an IHS-D EBIT down margin of 13.4% and the trusted earnings per year of 78 cents in the quarter, both down from last year.

We delivered an adjusted EBITDA margin of 13, 4% and adjusted earnings per share of <unk> 78 in the quarter, both down from last year.

Speaker 4: And as Rick mentioned, Timkin delivered record sales of 4.1 billion and record adjusted earnings per share of $4.72 in 2021 in a robust yet challenging environment.

And as Rich mentioned timken delivered record sales of $4 1 billion.

And record adjusted earnings per share of $4 72 in 2021, and a robust yet challenging environment.

Turning to slide 13, let's take a closer look at our fourth quarter sales performance.

Speaker 4: Turning to slide 13, let's take a closer look at our fourth quarter sales performance.

Speaker 4: Organically, sales were up nearly 13% from last year, as both segments delivered double-digit growth in the court.

Organically sales were up nearly 13% from last year.

As both segments delivered double digit growth in the quarter.

Speaker 4: In addition, we saw double-digit growth across both our bearings and power transmission products.

In addition, we saw double digit growth across both our bearings and power transmission product lines.

Pricing was positive while acquisitions and currency translation combined had a modest impact on the topline in the quarter.

Speaker 4: Pricing was positive while acquisitions and currency translation combined had a modest impact on the top line in the court.

Speaker 4: On the right-hand side of this slide, you can see our organic growth by region, excluding both currency and acquisitions. All regions were up in the quarter versus the year-ago period.

On the right hand side of this slide you can see our organic growth by region, excluding both currency and acquisitions.

All regions were up in the quarter versus the year ago period.

Let me make a comment or two on each region.

Latin America, we delivered strong growth in the quarter up 21% with most sectors up led by industrial distribution.

Speaker 4: In Latin America, we delivered strong growth in the quarter of 21 percent, with most sectors up led by industrial distribution.

Speaker 4: In Europe , we're up 17% with off highway, general industrial, and distribution posting the strongest games.

In Europe , we were up 17% with off highway general industrial and distribution posting the strongest game.

Speaker 4: In Asia, we were up 3%. As most sectors rub modestly, while renewable energy was roughly flat in the quarter as expected against a difficult comp last year.

In Asia, we were up 3% as most sectors were up modestly while renewable energy was roughly flat in the quarter as expected against a difficult comp last year.

Speaker 4: And finally, in North America, our largest region, we were up 14%.

And finally in North America, our largest region, we were up 14%.

Speaker 4: with solid growth across most sectors led by industrial distribution and off-highway.

With solid growth across most sectors led by industrial distribution and off highway.

Speaker 4: Turning to slide 14, adjusted EBITDA was 135 million or 13.4% of sales in the fourth quarter. Compared to 144 million or 16.4% of sales in the fourth quarter.

Turning to slide 14, adjusted EBITDA was 135 million or 13, 4% of sales in the fourth quarter.

Compared to a $144 million or 16, 2% of sales last year.

Speaker 4: but a client and adjusted evata reflects the impact of significantly higher material, logistics, and other operating costs. Partially offset by higher volume, positive price.

The decline in adjusted EBITDA reflects the impact of significantly higher material logistics and other operating costs, partially offset by higher volume.

Positive price mix and favorable currency.

EBITDA margins in the fourth quarter were down 280 basis points versus last year.

Speaker 4: He put down margins in the fourth quarter. We're down 280 basis points versus last year.

Speaker 4: price realization was more than offset by continued cost inflation, supply chain constraints, and...

As price realization was more than offset by continued cost inflation.

Fly chain constraints and related inefficiencies.

Let me comment a little further on our manufacturing and operating expense performance in the quarter.

Speaker 4: Let me comment a little further on our manufacturing and operating expense performance in the quarter.

Speaker 4: On the manufacturing line, we were impacted by higher labor costs and plant inefficient.

On the manufacturing line, we were impacted by higher labor costs and plant inefficiencies.

Speaker 4: As we continue to navigate through the challenging supply chain environment.

As we continue to navigate through the challenging supply chain environment.

Speaker 4: This was offset partially by the impact of slightly higher production volume as we continue to ramp up to serve higher demand.

This was offset partially by the impact of slightly higher production volume as we continue to ramp up to serve higher demand.

Moving to material and logistics, we saw significantly higher costs in the fourth quarter compared to last year and higher costs in the third quarter.

Speaker 4: We saw significantly higher costs in the fourth quarter compared to last year. And higher costs in the third quarter.

Speaker 4: Higher costs reflect continued inflationary pressures, including higher surcharges and other increases for material suppliers and freight vendors around the world. And finally, on the SGNA other line, costs were up year on year in the quarter. As we had increased spending,

Higher costs reflect continued inflationary pressures, including higher surcharges and other increases for materials suppliers and freight vendors around the world.

And finally on the SG&A other line.

Costs were up year on year in the quarter.

As we had increased spending to support the sales levels.

And higher compensation expense versus the year ago period.

Speaker 4: On 515, you'll see that we posted net income of $53 million, or 82 cents per diluted chair for the fourth quarter on a gap basis, which includes four cents of income from special items. Driven by-

On slide 15, Youll see that we posted net income of $63 million or <unk> 82 per diluted share for the fourth quarter on a GAAP basis, which.

Which includes <unk> <unk> of income from special items.

Driven by pension Mark to market income in the period.

Speaker 4: On an adjusted basis, we earned $0.78 per share in the quarter, down 7% from last year.

On an adjusted basis, we earned <unk> 78 per share in the quarter down 7% from last year.

Speaker 4: Our fourth quarter adjusted tax rate was 21.3%, which brought our full year adjusted rate down to 24%.

Our fourth quarter adjusted tax rate was 21, 3%, which brought our full year adjusted rate down to 24%.

Speaker 4: This refluxed our geographic mix of earnings and the impact of tax planning initiatives.

This reflects our geographic mix of earnings and the impact of tax planning initiatives.

Speaker 4: Now let's move to our business segment results, starting with process industries on 516.

Now, let's move to our business segment results, starting with process industries on slide 16.

Speaker 4: For the fourth quarter, process industry sales were 528 million, up about 15% from last year. Organically,

For the fourth quarter process industry sales were $528 million.

About 15% from last year.

Organically sales were up 14, 5%.

Speaker 4: driven by growth across most sectors with distribution and general industrial posting the strongest game.

Driven by growth across most sectors with distribution and general industrial posting the strongest gains.

Speaker 4: Marine and industrial services were also up, and heavy industries was up slightly, while renewable energy was slacking.

Marine and the industrial services were also up in heavy industries was up slightly.

Renewable energy was flat.

Speaker 4: Looking at our non-bearing product lines, linear motion generated the strongest growth year on year in the quarter. As we continue to win new business and...

Looking at our non bearing product lines linear motion generated the strongest strongest growth year on year in the quarter.

As we continue to win new business and benefit from higher demand.

Speaker 4: Process industry adjusted the bidon the fourth quarter was 105 million or 20% of sales compared to 102 million or 22% of sales last year.

Process industries adjusted EBITDA in the fourth quarter was $105 million or 20% of sales compared to $102 million or 22% of sales last year.

Speaker 4: The decline in process segment EBITDA margin was due to the impact of higher operating costs.

The decline in process segment EBITDA margin was due to the impact of higher operating costs, which essentially offset the benefit of improved volume and price mix in the quarter.

Speaker 4: which essentially offset the benefits of improved volume and price mix in the quarter.

Now, let's turn to mobile industries on slide 17.

Speaker 4: In the fourth quarter, mobile industry sales were 480 million, up 10.6 percent.

In the fourth quarter.

Industry sales were $480 million.

Up 10, 6% from last year.

Speaker 4: Organically, stills increase nearly 11% with off-highway posting the strongest game.

Organically sales increased nearly 11% with off highway posting the strongest gain.

Speaker 4: We were up in aerospace, rail, and heavy truck as well, while automotive was relatively flat. We also benefited from higher-

We were up in aerospace rail and heavy truck as well, while automotive was relatively flat.

We also benefited from higher pricing in the quarter.

Speaker 4: Mobile industry's adjusted even down the fourth quarter was 41 million or 8.6% of sales.

Mobile industries adjusted EBITDA in the fourth quarter was 41 million or eight 6% of sales.

Speaker 4: compared to 54 million or 12.4% of sales last year.

Compared to $54 million or 12, 4% of sales last year.

Speaker 4: The decline in mobile segment EBITDA and margins was driven by the impact of higher operating costs, which more than offset the benefit of higher volume and price next in the quarter.

The decline in mobile segment, EBITDA and margins was driven by the impact of higher operating costs, which more than offset the benefit of higher volume and price mix in the quarter.

Speaker 4: Note that mobile had more significant material cost headwinds in the quarter than process. And this impacted its margins.

Note that mobile had more significant material cost headwinds in the quarter than process.

And this impacted its margins to a greater degree.

Turning to slide 18, you'll see we generated operating cash flow of $103 million in the fourth quarter.

Speaker 4: Turn to slide 18. You'll see we generated operating cash flow of $103 million in the fourth.

Speaker 4: And after CapAX, free cash flow was 58 million. Looking at the full year, free cash flow was 239 million.

And after Capex free cash flow was $58 million.

Looking at the full year.

Free cash flow was $239 million.

From $456 million last year.

Speaker 4: The year on your decline reflects the impact of higher working capital to support the record sales levels and longer lead times in the supply chain. Answer position us for strong growth against.

The year on year decline reflects the impact of higher working capital to support that record sales levels and longer lead times and the supply chain.

And to position us for strong growth again in 2022.

Speaker 4: In addition, we had higher cat-backs to fund growth and operational excellence initiatives.

In addition, we had higher Capex to fund growth and operational excellence initiatives.

Speaker 4: And we also saw a more normal level of payments for employee medical benefits this year.

And we also saw a more normal level of payments for employee medical benefits this year.

Speaker 4: Looking across both 2020 and 2021, we did convert over 100% of our adjusted net income to free cash flow.

Looking across both 2020 in 2021, we did convert over 100% of our adjusted net income to free cash flow.

Speaker 4: From a capital allocation standpoint, during the fourth quarter, Timkin paid it 390As consecutive quarterly dividend and repurchased 500,000 shares.

From a capital allocation standpoint during the fourth quarter timken paid 398th consecutive quarterly dividend.

And repurchased 500000 shares of company stock.

Speaker 4: In total, we've bought back almost 1.3 million shares during the year.

In total we bought back almost one 3 million shares during the year.

Speaker 4: And we have over 9 million cheers remaining on our current authorization.

And we have over 9 million shares remaining on our current authorization.

Speaker 4: Taking a closer look at our capital structure, we ended the quarter with a strong balance.

Taking a closer look at our capital structure, we ended the quarter with a strong balance sheet.

Speaker 4: Our leverage, as measured by NetDead to adjust to divita, was 1.7 times at year end.

Our leverage as measured by net debt to adjusted EBITDA was one seven times at year end.

Speaker 4: Below last year's level, and near the low end of our target arena.

Below last year's level and near the low end of our targeted range.

Speaker 4: This puts us in a great position to continue to drive shareholder value creation through capital deployment consistent with our strategy.

This puts us in a great position to continue to drive shareholder value creation.

Through capital deployment consistent with our strategy.

Now, let's turn to the outlook with a summary on slide 19.

Speaker 4: As Rick highlighted, we expect strong revenue earnings growth again in 2022.

As rich highlighted we expect strong revenue and earnings growth again in 2022.

Speaker 4: Replaning for another year of record revenue, up around 10% in total at the midpoint of our guidance versus 2021. Net of currency impact.

We're planning for another year of record revenue up around 10% in total at the midpoint of our guidance versus 2021.

Net of currency impact our guidance implies that revenue will be up 11% organically.

Speaker 4: which would mark our second straight year of double digit organic growth. We expect most end markets...

Which would mark our second straight year of double digit organic growth.

We expect most end markets and sectors to be up year on year.

Speaker 4: And we will also benefit from organic outgrowth initiatives and 400 basis points of net positive price.

Also benefit from organic outgrowth initiatives and 400 basis points of net positive pricing.

Speaker 4: I read about what is supported by our Orbalt, which is up double digits from last year, as well as customer sentiment, and other external data.

Our revenue outlook is supported by our order book, which is up double digits from last year as well as customer sentiment and other external data.

Speaker 4: On the bottom line, we expect record adjusted earnings per share in the range of $5 to $5.40, which would be up 10% from last year at the mid-

On the bottom line, we expect record adjusted earnings per share in the range of $5 to $5 40, which would be up 10% from last year at the midpoint.

The midpoint of our outlook implies a 2022 adjusted EBITDA margin will be around 17% down slightly from full year 2021 is.

Speaker 4: The midpoint of our outlook implies that 2022, a just-a-dibit down margin will be around 17 percent down slightly from full year 2021.

Speaker 4: As higher price realization is expected to be more than offset by higher year over year operating costs, principally in the first half of the year.

As higher price realization is expected to be more than offset by higher year over year operating costs, principally in the first half of the year.

Speaker 4: Recall that material and logistics costs and related inefficiencies accelerated in the second half of 2021.

Recall that material and logistics costs and related inefficiencies accelerated in the second half of 2021.

Speaker 4: Our outlook assumes that costs will largely persist at these elevated levels. See channel 10 mobile 2020.

Our outlook assumes that cost will largely persist at these elevated levels through 2022.

Speaker 4: In addition, we're expecting continued inflation across other costs like wages and energy.

In addition, we're expecting continued inflation across other costs like wages and energy.

Speaker 4: but we are planning for some improvement in manufacturing performance from our ongoing operational excellence initiative.

We are planning for some improvement in manufacturing performance from our ongoing operational excellence initiatives.

Speaker 4: Moving to free cash flow. For 2022, we estimate conversion of around 70% of adjusted net income.

Moving to free cash flow for 2022, we estimate conversion of around 70% of adjusted net income.

Speaker 4: We expect higher free cash flow in 2022 as compared to last year, driven by the impact of higher earnings, offset partially by higher cap expense.

We expect higher free cash flow in 2022 as compared to last year, driven by the impact of higher earnings offset partially by higher Capex spending we are.

Speaker 4: We are planning for CAPEX in the range of 4% of sales, which includes several growth-related projects and higher spending on initiatives to improve operating efficiency.

Planning for Capex in the range of 4% of sales, which includes several growth related projects and higher spending on initiatives to improve operating efficiency.

Speaker 4: For the full year, we anticipate net interest expense to be roughly in line with 2021 levels. And we estimate that our adjusted tax rate will be around 25% based on our planned geographic mix of earnings.

For the full year, we anticipate net interest expense to be roughly in line with 2021 levels.

And we estimate that our adjusted tax rate will be around 25%.

Just on our planned geographic mix of earnings.

Speaker 4: So to summarize, Tim Kidd delivered record revenue and earnings per share in 2021.

So to summarize timken delivered record revenue and earnings per share in 2021.

Speaker 4: and we are well positioned to do so again in 2022.

We are well positioned to do so again in 2022.

Speaker 4: Our team is working hard to mitigate the higher cost through pricing and other tactics, and we continue to focus on driving our profitable growth strategy.

Our team is working hard to mitigate the higher costs through pricing and other tactics and we continue to focus on driving our profitable growth strategy.

Speaker 1: This concludes our formal remarks, and we will now open the line for questions. Operator. Thank you. Once again, it is Star One for questions.

This concludes our formal remarks.

And we will now open the line for questions operator. Thank.

Thank you once again it is star one for questions.

We will take our first question from Rob Wertheimer with Melius research.

Speaker 1: We'll take our first question from Rob Worthimer with Melius Research. Thank you.

Thank you good morning, everybody.

Alright.

Speaker 5: So, Rich, you've taken a probably a very realistic but maybe more conservative look at supply chain disruption in the outlook.

Richard taken.

Probably very realistic, but maybe more conservative look at supply chain disruption and the outlook there.

Speaker 5: comments you made. I'm just curious if you've spent a lot of time with your customers and partners and what the general sentiment is out there. I think some are still hoping for a 2H improvement. I'm not sure if that's tangibly founded or just founded on the generally good management that's out there. That's one question. I'll just do my second one as well. If you could just talk us through any changes and strategically how you're looking at pricing as we walk into an inflationary environment. Thanks.

The comments you made I'm just curious if you spent a lot of time with your customers and partners on what the general sentiment is out there I think some are still hoping for two weeks improvement I'm not sure. If that's tangibly founded or just started on the generally good management that's out there.

That's one question up I'll, just do my second one as well if you could just talk us through.

Any changes in strategically how youre looking at pricing as we walk into an inflationary environment. Thank you.

Speaker 3: Yeah, thanks Rob. Certainly talking a lot, the customer is talking to board members and talking to how others are dealing with this. And...

Yes, thanks, Rob.

Certainly talking to lots of customers talking to Florida.

Board members and talking to how others are dealing with this and.

Speaker 3: as releases come out, we'll digest some of those as well. I think we do have...

You know as releases come out we will digest some of those as well I think we do have.

Speaker 3: Probably one bit of a uniqueness to our business model and that because over half of our businesses, bearings and the steel content and bearings would probably are a little disproportionately impacted by steel costs, which would be one of the three big buckets of costs that have hit us.

Probably.

One bit of uniqueness to our business model in that because over half our business is bearings in the steel content and bearings, we probably are a little disproportionately.

Impacted by steel costs, which would be you know one of the three big buckets of cost that have hit us.

Speaker 3: As you look at our last four quarterly EBITDA walks, our material logistics costs have gone from negative 11 in the first quarter to negative 27.

As you look at our last four.

Quarterly EBITDA walks, our material logistics costs have gone from negative 11 in the first quarter and a negative 27.

Speaker 3: the negative 53 to negative 58. So from 38 in the first half to 111 in the second half on a little lower volume in the second half. So we are basically assuming that those costs

The negative <unk> 53 to negative <unk> 58.

And yeah. So hutter from 38 in the first half to 111 in the second half on a little lower volume in the second half so where we are basically assuming.

That those costs continue.

Speaker 3: I think for material, it could be some relief there, be surprised if those dropped dramatically in a robust market. I think the logistics one is a little bit more of a wild car, I mean the price is there, the steel is maybe a little higher than what would be normal in a good industrial market for us and happen a little faster maybe than normal, but logistics is...

I think for material you know it could be some relief there.

Be surprised if those dropped dramatically in a robust market I think the logistics one is a little bit more of a wildcard I mean the prices there. The steel is maybe a little higher than what would be normal in a in a good industrial market for us and it happened a little faster maybe than normal.

But logistics is very unique for us and that.

Speaker 3: very unique for us in that, you know, things that we were...

Things that we were buying.

Speaker 3: Buying a year ago in some cases, transportation routes are up 200-300 plus percent.

Buying a year ago in some cases no transportation routes are up 200 300 plus percent.

Speaker 3: We've assumed again that continues. And right now I would say that is the case. We don't see any relief on that in the first quarter. But certainly if we were to see some relief on that in the second half of the year, that would be a favorable for us. And on the flip side.

Yeah, we've assumed again that that continues.

And in right now I would say that is the case, we don't see any relief on that in the first quarter.

But certainly if we were to see some relief on that in the second half of the year that would be a favorable for us and on the flip side.

Speaker 3: You know, it's not taking a step up today. I don't think it's going to in the second quarter, but it looks good for that. But at this point last year, we weren't expecting what happened as well. So I picked the logistics one.

It has not taken a step up today I don't think it's going to in the second quarter, but it looks good for that but at this point last year, we weren't expecting what happened as well so I think the logistics one.

Speaker 3: I think it's more likely than not. It would be a favorable for us as of the year progresses, but You know, we weren't we weren't conservative enough on it last year And I think that's a little bit of a different thing is we look at the pricing there Certainly we would fully expect to recover all of material if logistics remains a structural

I think it's more likely than not it would be favorable for us as the year progresses, but.

We weren't we weren't conservative enough on it last year, and then I think that's a little bit of a different thing as we look at the pricing there.

Certainly we would fully expect to recover all material if logistics remains a structural.

Speaker 3: change in the industry, we would have to recover that as well. I think we're trying to play that one down the middle a little bit and cover some of it and share some pain. I do think that's one of the challenges as we look at the price cost dynamics is there is a significant element of this of financial support, but I'm always wanting to go ahead and would find the best way.

Change in the industry, we would have to recover that as well I think you know or try to play that one down the middle of a little bit and and cover some of it and share some pain and I didn't think that you know that's one of the challenges as we look at the price cost dynamic is there is a significant element of that is that of our cost of that debt.

Speaker 3: I believe clearly our transitory, they lasted longer than what we have expected. You know, we're still dealing with elevated absenteeism and a few of our plants in the US as well as in Eastern Europe from coronavirus.

I believe clearly are transitory they lasted longer than what we had expected.

We're still dealing with elevated absenteeism and and a few of our plants in the U S as well as in Eastern Europe .

From Corona virus.

It's written in the fall.

Speaker 3: In the fourth quarter, we had plants shut down in China from power shortages. We still had premium freight. Your plant shut down in China for half the month and you're paying premium freight. I mean, to go to a customer and expect them to pay you for that is a little bit unique. So certainly we expect to cover normal inflationary costs.

Last quarter, we had plants shut down in China from power shortages.

And you still had.

Premium freight.

Yep, you plant shutdown in China for half the months and you're paying premium freight I mean to go to a customer and expect them to.

Pay you for that is there's a little bit.

Unique so certainly we expect to cover normal inflationary cost.

Speaker 3: material costs, wages, if energy goes higher, steel goes higher, etc. We will recover those. You know, on the transitory side we have some proven and I think we are being conservative there, but they lasted longer than what we thought to this point and there's, you know, there's still largely there today as well. I think when you look at the manufacturing bucket on those

Material costs wages, if energy goes higher steel goes higher et cetera, we will recover those.

Transitory side, we have to improve them and I think we are being conservative there but.

Lasted longer than what we thought to this point and there's you know there's still.

Largely there today as well I think when you look at the manufacturing bucket on those.

Speaker 3: for walks that we would have had last four quarters. We were plus nine.

For walks away had last four quarters, we were plus nine.

Speaker 3: Million Q1 plus 5 plus 5 and a minus 8. Typically the fourth quarter would be wider, would be lower and that was a little extreme. So only a plus 11 for the year. You know, that's where higher onboarding costs are hitting us. The abs and Tism is hitting us.

And in Q1, plus five plus five and minus eight.

Typically the fourth quarter would be wider.

Would be lower and although that was a little extreme so only a plus 11 for the year that's where.

Higher onboarding costs are hitting us the absenteeism is hitting us.

Speaker 3: having parts that you're waiting for for production, stuck in a port for a month or hitting us, et cetera, et cetera.

Having parts that you're waiting for for production stuck in a port for a month or hitting us etcetera etcetera, and that's you know that's that's an area that that's pretty disappointing that given the volume.

Speaker 3: And that's an area that's pretty disappointing that given the volume.

Speaker 3: that we are running through these operations. We would typically do much better there. Again, I think we've been conservative there. You know, this is an area I think we're good at, whereas Phil said we're working at relentlessly, tirelessly. We should...

That we are running through these operations, we would typically do much better there again I think we've been conservative there.

It's an area I think we're good at whereas Phil said, we're working it relentlessly tirelessly.

We've seen some improvement and then you know then we see some new issues arise as well.

Speaker 3: improvement and then we see some new issues arise as well. Certainly I think that and logistics would be the two upsides to the cost situation.

Certainly I think that and logistics you know would be the two upsides to.

So the cost situation.

Speaker 3: And then the other thing I think, you know, we, we, we had, I would say normal ish, maybe slightly on the high end of normal wage inflation last year, we are expecting

And then the other thing I think we are we had I would say normal ish, maybe slightly on the high end of normal wage inflation last year, we are expecting.

Speaker 3: and planning for and preparing for a little higher wage inflation around the world this year and that's baked in there. But on the flip side we also have a very full, as we usually do full self-help story on our cost side as well. The footprint things I talked about last that we did last year and that we'll do this year will help us. So I hope it is a conservative outlook.

In planning for and preparing for a little higher wage inflation around the world.

That's baked in there, but on the flip side. We also have a very full as we usually do full self help story on our cost side as well the footprint things I talked about one that we did last year and that will be this year.

It will help us.

So I hope it is a conservative outlook.

Speaker 3: And we're working hard and you know the parts that are directly in our control We're doing a lot of and we have made a lot of progress on it But as everybody else has talked to me these things are still they're still all out there on the pricing side

And we're working hard.

And the parts of it that are directly in our control.

We're doing a lot of and we have made a lot of progress on it.

But as everybody else has talked I mean, these things are still they're still all out there.

The pricing side.

Speaker 3: And again, your answer is yes. If you've got this transitory issue versus...

I think the answer is yes, if you know again, you've got this transitory issue versus a.

Speaker 3: True cost increases that we expect to stay in perpetuity and then the steel piece, we've historically had a pretty good model there. Maybe there's a lag on the way up and a lag on the way down that we benefit from.

True cost increases that we expect to stay in perpetuity and then you know the steel the steel piece, we've historically had a pretty good model there maybe.

Maybe there is a lag on the way up and in a lag on the way down that we benefit from.

Speaker 3: And I think that model still works for us.

And I think that model still works for us.

Speaker 3: Because there was a cyclical element to that inflation versus just being like wage inflation typically doesn't go backwards. So if we're in a situation where we think our costs are going to be going up, we probably look at about 5% up last year of sales. And if we were looking at $4 to $5 a year, yeah, I think our commercial model is going

Because there's a cyclical element to that that inflation versus just being like wage inflation typically doesn't go backwards. So if we're in a situation.

Where we think our costs are going to be going up.

We'd probably be looking at about 5% up last year of sales and you know if we were looking at four to five year, Yeah, I think our commercial model.

Speaker 3: We have to change a little bit where in a long-term contract.

What has to change a little bit where.

Long term contracts have generally been a win win for us and our customers and our.

Speaker 3: have generally been a win for us and our customers and

Speaker 3: You know, they flipped last year to a win lose for us in some cases where we were absorbing those costs.

You know they flipped last year to a win lose for us in some cases, where we were absorbing those costs. So we would definitely have to change that model going forward and I think as this year progresses, we would share more with you on that.

Speaker 3: So we would definitely have to change that model.

Speaker 3: going forward and I think as this year progresses we would share more with you on that. We certainly haven't been signed.

We certainly haven't been signing.

Speaker 3: one term commitments without without pricing, but we still have some and I think you know the expectation is probably still that that model will remain, but we'll see.

Our long term commitments without without pricing, but we still have some and I think the expectation is probably still that that model will remain.

But we'll see.

Thank you much.

Thanks, Rob Thanks, Rob.

Speaker 1: Moving on, we'll go to Steve Barger with Key Bank Capital.

Moving on we'll go to Steve.

Barker with Keybanc capital.

Hey, good morning, guys.

Speaker 6: More space, please. You know, just obviously incremental margins weaker than people expected. You've been clear on the challenges stemming from the inflationary environment. Should we be thinking significantly better incrementals in the back half as you take these mitigation actions and pricing rolls through? And do you expect EPS will be up year over year in one queue?

Alright, Steve.

I'm, just obviously incremental margins are weaker than people expected you've been clear on the challenges stemming from the inflationary environment.

Should we be thinking significantly better incrementals in the back half as you take these mitigation actions and pricing rolls through and do you expect EPS will be up year over year in <unk>.

Speaker 3: So yeah, I think you know, you go back to my material logistics comment, you know, looking at last year, roughly 40 in the first half, 110 in the second half. So that 110, you know, we're planning on that as we're going in. So the cost comps in the first half of the year are significantly higher. We expect some improvement in price.

So yes, I think you go back to my material logistics.

Comment Youre looking at last.

Last year.

Roughly 40 in the first half 110 in the second half. So that 110, we were planning on that rolling in and so the cost comps in the first half of the year a significantly higher we'd expect some improvement in price through the course of the year, but most of it are happening today. So.

Speaker 3: through the course of the year, but most of it happening today. So yeah, I would see year over year comp wise a stronger second half than first half, not based really on cost improving, but more on the cost rolling over into the first half and then price extending.

Yeah.

See a year over year comp wise a.

A stronger second half than first half not based really on cost improving.

But more on the the cost rolling over into the first half and then price extending.

Speaker 3: You know, not looking to provide quarterly guidance. Certainly would expect revenue to be up.

Not.

Looking to provide quarterly guidance, certainly would expect revenue to be up.

Speaker 3: I would expect a sizable step up in margins and earnings per share from the fourth quarter, the first quarter we've done that last couple of years and that was without significant pricing from Q4 to Q1.

We'd expect a sizable step up in margins and earnings per share from the fourth quarter. The first quarter. We've done that the last couple of years and that was without.

No significant pricing from Q4 to Q1.

Speaker 3: And then I think, so, you know, certainly would expect a sizable step up, but you know, don't want to get into the specifics of higher or lower than, than last year. Obviously it was a,

And then I think so.

I certainly would expect a sizable step up but you know I don't want to get into the specifics of a higher or lower than than last year. Obviously it was a.

Speaker 3: at last year ended up being the High Water Mark for us for margins in the first quarter.

Last year ended up being the high watermark for us for margins in the first quarter.

And I'll pause only ask a follow up.

Speaker 6: All right. You know, you mentioned that both staffing and inventory are up. Just, you know, you're over your growth in inventory outpaced revenue growth in the back half of 21. Is any of the margin pressure you expect this year a function of slowing production to balance inventory or will you still grow inventory in excessive sales as the year progresses given the demand environment?

Alright.

You know you mentioned that both staffing and inventory are up.

Just year over year growth in inventory outpaced revenue growth in the back half of 'twenty. One is there any of the margin pressure you expect this year a function of slowing production to balance inventory or will you still grow inventory in excess of sales as the year progresses, given the demand environment.

Speaker 3: We would still expect, so the answers know, we would still expect to grow inventory more modestly this year than last year. We don't have, you know, some of this inventory is.

We would still expect so the answer is no we would still expect to grow inventory more modestly this year than last year.

We don't have.

Some of this inventory is.

Speaker 7: directly a function of longer supply chains things that used to take two weeks or taking four weeks. So there is that element. Again, we have a date significant improvement in that in our assumptions. But under the assumption that we're pushing 10% revenue growth and optimistic about it next year, which is we sit here today. That's what we're thinking for both of those. We would expect to go up this year. Got it. Thanks.

Directly a function of longer supply change things that used to take two weeks are taking four weeks.

So there is that element again, we haven't baked a significant improvement.

In that in our assumptions.

But under the assumption that.

We're pushing 10% revenue growth and optimistic about next year, which as we sit here today.

What were thinking for both of those.

We would expect inventory to go up this year.

Got it thanks.

Thanks, Dave.

Moving on we'll go to Ross <unk> with Bank of America.

Speaker 8: Good morning, guys.

Hey, good morning, guys.

Good morning Ross.

Speaker 9: Just curious, Rich, how are production rates? How do they feel right now for your customers? Are they starting to improve? And can you just give any color on how what kind of variations you might be seeing across some of your key markets?

Just curious rich.

Howard production rates, how did they have any feel right now for your customers I mean are they starting to improve and can you can you just give any color on how what kind of variations you might be seeing.

Ross.

Some of your some of your key markets.

Speaker 3: You know, 1, if you know, it's like 7 across our markets, you look, I think we've got everything up mid single digits or more with the exception of renewable energy. And that we have flat coming off of a very good year.

One.

On slide seven our across our markets, you'll look I think.

We've got everything up mid single digits or more with the exception of renewable energy.

And you know that we have flat coming off of.

Very good year, so I think when you look across that.

Speaker 3: So, you know, I think it was you look across that just about everything's really in the favor, in our favor in terms of overall demand. I think inventory in the channels and restocking is in our favor. I think the capital equipment cycles in our favor.

Just about everything is really in our favor in our favor in terms of overall demand.

Inventory in the channels and restocking is in our favor I think the capital equipment cycles in our favor.

Speaker 3: I think the MRO cycle really started moving more in our favor in the second half of the year. Our distributors have got much more bullish, are looking to put inventory in and they're revenue for the second half of 21 as well as their outlook for 22 improve.

I think the MRO cycle really started moving more in our favor in the second half of the year our distributors.

Much more bullish are looking to put inventory in their revenue for the second half of 'twenty, one as well as their outlook for 'twenty two improved.

Speaker 3: Um, you know, and then even when you look, you know, into some of the sub markets within here, I mean, even some of the markets, you know, that were.

And then even.

Some of the Submarkets within ear I mean, even some of the markets that were.

Speaker 3: Written off as dead maybe a couple of years ago for capital like oil and gas or showing some signs of life. So the overall demand situation very strong.

Written off is dead, maybe a couple of years ago for capital like oil and gas are showing some signs of life. So.

The overall demand situation very strong.

Speaker 3: And I think to your earlier point about their issues, they're all still dealing with issues. Certainly the erratic demand that we were facing.

And I.

I think the to your earlier point about their issues are all steel still dealing with issues certainly the.

Erratic demand.

Facing.

Speaker 3: I guess at this time last year and probably really through second or third quarter, I think that is definitely improved. You know, a year ago people were just scrambling and we had a lot more concerns about overordering. And I think a lot of that has improved, but everybody's still.

I guess at this time last year, and probably really through second and third quarter I think that that is definitely improved.

A year ago people were scrambling and you know we have.

What we're concerned about over ordering.

And I think a lot of that has improved but everybody is still.

Speaker 3: dealing with issues and it is definitely a more erratic or chopier market environment than would be ideal and I think that's for us as well as for our customers as well as for our suppliers. But demand

Dealing with issues and it is definitely a more erratic or choppy or market environment.

Then than would be ideal and I think that's for us as well as for our customers as well as for our suppliers.

But demand strong.

Speaker 4: And the only thing I would add, Ross, is this is Phil, just on inventory, is when we think about inventory at our customers, both distributors

Yeah, the only thing Ross.

This is Phil just on inventory is when we think about.

Inventory at our customers, both distributors and Oems and when we would look at inventory and say it is still relatively low given the demand levels.

Speaker 4: In OEM, I mean, we were looking inventory and say it's still relatively low given the demand level. So while we've added to inventory in 2021, I expect to do so again in 2022 and we do believe our distributors will add inventory and our OEM, the inventory levels, particularly at OEM dealers in the aftermarket channels are still relatively low. So I think that's a favorable factor as well. I'm going to point.

While we've added some inventory in 2021 and expect to do so again in 2022, and we do believe our distributors will will add inventory.

And our OEM inventory levels, particularly at OEM dealers and the aftermarket channels are still relatively low so I think that.

That's a favorable factor as well heading into 'twenty two.

Speaker 3: And I realized order trends are still very strong. I mean, towards a low, I was curious more production. And your key customers is actually starting to accelerate the service all this backlog. Or are they? Yeah, and I think the answer is definitely yes. There are, there's the well publicized issues of chips, which I know has made that market.

And thanks, guys and I realized quarter trends are still.

Very strong inventories are low I was curious more production.

Your key customers is actually starting to accelerate and service all the backlog or are they yes.

The answer that is I think to answer that is definitely yes. There are no. There's no well publicized issues of chips, which say that's made that market choppy or I think in our first quarter comp for automotive is tough, but by the second quarter. I think is one that fell off last year or so.

Speaker 3: Our first quarter comp for automotive is tough, but by the second quarter, I think is when that fell off last year. So

Speaker 3: There's some other things out there. There's customers, customers are dealing with some chemical issues, paint issues.

And there's some other things out there, there's a customers or customers are dealing with chemical issues paint issues.

Speaker 3: But I think in general their capital equipment builds are up and then in particular I think the MRO cycle is also kicking in pretty strong. So I think...

But but I think in general their capital equipment builds are up and then and in particular I think the MRO cycle is also kicking in pretty strong so I think.

Speaker 3: I'd say that to your point of order demand, you know, probably be higher than our 7% organic, but I think there's a reality there of what people are going to be able to do to hire people, build, etc. And we feel it's a pretty reasonable number.

So I'd say.

To your point of order demand probably be higher than our 7%.

Organic, but but I think there's a reality there of what people are going to be able to do to hire people build et cetera, and we feel it's a pretty reasonable number.

Speaker 4: Yeah, when we look at like a market, like off highway Ross, I mean, off highway across 21 and especially as we look at 22 and what our customers are doing, and we think.

Yes, when we look at like a market like off highway Ross I mean off highway across both 'twenty, one and especially as we look at 'twenty, two and our customers are doing and we think it's going to be the strongest market.

Speaker 4: It's going to be the strongest market since 2011. Now that was a super strong year as everybody remembers, but we think it's going to be probably the strongest year and off highway that we've seen since that time. So it is customers are ramping as Rich said, it's still a little choppy, particularly in the on highway markets, our on highway auto and truck customers still a little choppy, but strong and getting stronger.

Since 2011, now that was a super strong year as everybody remembers, but we think it's going to be probably the strongest year in off highway that we've seen.

Since that time. So it is our customers are customers are ramping as rich said, it's still a little choppy, particularly in the on highway markets are on highway auto and truck customers still a little choppy, but.

But strong and getting stronger.

Speaker 7: Okay, got it. And I'll get back into things. Thanks.

Okay.

Got it.

I'll get back in queue. Thanks.

Thanks Ross.

Speaker 1: And next we'll go to Courtney, the cop on us with morning.

And next we'll go to Courtney <unk> with Morgan Stanley .

Speaker 10: Hi, thanks for the question. I think you talked a little bit about first half, versus second half, incremental, but Rich, I think you made a comment that we will see the evidence of pricing in the first quarter results. Can you just help us pair that comment with how we should be thinking about the sequential step up in margins and any differences we should be thinking about between process and mobile and how that price will flow through to margins?

Hi, Thanks for answering my question.

Thank you talked a little bit about them.

First half versus second half Incrementals, but rich I think you made a comment that we will see the evidence of pricing in the first quarter results. So can you just help us pair that comment with how we should be thinking about the sequential step up in margins in any differences, we should be thinking about you know between process.

Mobile and <unk>, and how that pricing will flow through to margins.

Yeah.

Speaker 3: Yeah, so we do expect, you know, again, it was a city today. We have the vast majority of 4% in place. Wasn't all January 1st with distribution pricing that rolled in February 1st, but pricing...

Yeah. So we do expect again when you sit here today, we have the vast majority of the 4%.

Place.

It was all January one some distribution pricing hold in February one.

But the pricing.

Speaker 3: It would move gradually off of the first quarter number. So you have a second half.

It would move gradually.

For the first quarter numbers so.

Second half.

Declared the second half response that I made was on Incrementals not margins right. So we're not really expecting a step up in margins. So it's really.

Speaker 3: response that I made was on incremental not margins, right? So we're not really expecting a step up in margins. So it's really an issue of the comps on cost.

An issue of the comps on cost.

Speaker 3: That by the time you get to the second half, you had lower margins and all those costs in that we're forecasting will still be there, but the incrementals are better. So it's really an incremental. So I think as we're looking at the year.

The time, you get to the second half you had lower margins in all of those costs and that will work.

And we're forecasting it will still be there.

So, but the incrementals are better so it's really a incremental so I think as you know as we're looking at the year.

Speaker 3: a significant step up in performance from Q4 to Q1.

A significant step up in performance from Q4 to Q1.

Speaker 3: and I'd say some normal seasonality, typically where our revenue declines even in a strong year a little bit from the first half to the second half.

And I'd.

I'd say, some normal seasonality typically where our revenue declines even of a strong year a little bit from the first half to the second half.

Speaker 10: Okay, thanks. That's helpful. And then Phil, I think you had mentioned, you know, obviously being fairly conservative with respect to supply chain and, you know, wage energy pressures, but you are baking in some improvement in manufacturing performance. Can you just help us?

Okay. That's helpful. And then so I think you had mentioned.

Obviously being fairly conservative with respect to supply chain and wage energy pressures, but you are baking in some improvement in manufacturing performance can you just help us.

Speaker 10: think about how to quantify how much of an improvement you're baking in from manufacturing improvement. And, you know, is that something other than, yeah, I would have thought that that was, you know, supply chain improvement being reflected in improved manufacturing performance, but is there anything else that would be driving that?

Think about how to quantify how much of the improvement you are baking in from for manufacturing and prevent and.

Is that something other than I would've thought that that was in our supply chain improvement being reflected in improved manufacturing performance, but is there anything else.

That would be driving that.

Speaker 3: Well, the two are connected, right? I mean, if you don't have parts flowing into your operations smoothly, and we shift parts from one plant to another plant as well, right? We have feeder plants. So I mean, all of that.

Well.

Two are connected right I mean, when you are if you don't have parts flowing into your operations smoothly and we ship parts from one plant to another plant as well right. We have theater plants. So I mean all of that.

Speaker 3: Um, definitely affects labor productivity, but it was, you know, getting on that, you know, on the plus 11 we had in manufacturing last year on a double digit up year. I mean, that.

Definitely effects labor productivity, but it was again on that.

Plus 11, we had in manufacturing last year on a double digit up here I mean that.

Speaker 3: disappointing that that would not be two, three X, more favorable than what it was. We have definitely not baked in perfection. And we would expect, and we're still hiring in our plants. So even though we at, we make good progress on the onboarding. We still have some of those costs that were incurring this year and would expect to incur. So, and I would also say that's, you know, that would,

Yes, disappointing that that would not be two to three X more favorable than than what it was.

We have definitely not baked in perfection and and we would expect and we are still hiring in our plants. So even though we made good progress on the Onboarding, we still have some of those costs that were.

Incurring this year and would expect to incur.

So and I would also say that's that would I.

Speaker 11: I believe that will improve through the course of the year. It's been improving gradually, and I think it will continue to be a gradual improvement. It's not a step change through the year. Right. Okay, gotcha. Thank you. Please close star 3 to start the recording.

I believe that will improve through the course of the year, it's been improving gradually and I think it'll continue to be a gradual improvement not a step change through the year right.

Okay got it thank you.

Thanks Gordon.

And next we'll go to Chris Dankert with loop capital.

Speaker 7: Hey, morning guys. Thanks for taking my question. I think we touched on this a little bit earlier. You mentioned Strongest Year on Off-Highway in over a decade here. I guess, just any comments in terms of growth by segment here? I mean, is it fair to assume kind of a low teams, organic and mobile? Just any kind of preangulation you can give us there would be really appreciated.

Hey, good morning, guys. Thanks for taking my question.

We talked on the phone.

Hey, a little bit earlier.

Mentioned strongest year in off highway in over a decade here.

Just any comments in terms of growth by segment here I mean is it fair to assume kind of a low teens organic in mobile, but just any kind of regulation can give us there would be really appreciated.

Speaker 3: You know, between mobile and process, we're expecting pretty close. Pretty similar. So, you know, I would say within the bandwidth of air, I would call them the same.

You know between mobile and process, we're expecting pretty close pretty similar so I would say within within the bandwidth of our air I would call them the same.

Speaker 4: Yeah, I would say, yeah, pretty close organically. And actually, Courtney had asked the question about pricing across the segments. And, you know, the 400 basis points of pricing is relative, I would say, relatively similar across mobile and process. So we are, on the mobile side, it's a combination of surcharges on some of our multi-year agreements, as well as pricing. And obviously, on the process side, it's more pricing, pure base pricing, but expect roughly. So similar pricing, roughly, you know, similar organic volume across the segments.

Yes, I would say, we are pretty close organically and actually.

You had asked the question about pricing across the segments and the 400 basis points pricing is relative I would say relatively similar across mobile and process. So we are on the mobile side. It's a combination of surcharges on some of our multi year agreements as well as pricing and I would say on the process side, it's more pricing peer based pricing, but expect roughly.

So similar similar pricing roughly similar organic volume across the across the segments, Yes, I'd just add a little color I think within the segments I'm hearing in mobile so already mentioned off highway throw in rail, which has been a little slower to come out, but we're seeing that come on strong and we're optimistic about that this year. So I mean, it was probably be the two.

Speaker 3: Yeah, just to add a little color, I think within the segments, within mobile, Phil already mentioned off-highway, throwing rail, which has been a little slower to come up, but we're seeing that come on strong and we're optimistic about that this year, so I mean, those would probably be the two leads within mobile, but everything up. And then, again, in process, everything up. General industrial, obviously, with what's happening, and distribution will be the two leads with what's happening with...

<unk>.

Leads within mobile, but everything up.

And then again in process everything up Alright general industrial obviously with what's happening and distribution will be the two leads with what's happening with <unk>.

Speaker 3: everybody's supply chain, manufacturing, etc. Those would be the two areas that we would expect to be the strongest.

Everybody supply chain manufacturing et cetera, those would be the two areas that we would expect to be the strongest.

Speaker 7: God, that's really, really helpful guys. Glad to hear that. That high margin rail, but this is bouncing back nicely here. I guess shipping gears a bit, you know, thinking about, you know, SGNA kind of in light of the elevated absenteeism and more generalized wage inflation. When we're thinking about the SGNA growth contemplated to the guide, I mean, how do we think about that is, you know, kind of high field, the digital ballpark, just if any comments on how we can think about, you know, some of these costs.

Got it that's really really helpful guys glad to hear that that high margin rail but.

Thats back nicely here.

And I guess shifting gears a bit thinking about SG&A kind of in light of that elevated absenteeism and more generalized wage inflation.

When we're thinking about the SG&A growth contemplated in the guide I mean, how do we think about that is kind of high single digits in the ballpark just any comments on how we can think about some of these costs.

Speaker 7: You know, stabilizing a bed, kind of what that means for a for us to name for you guys kind of through 2022.

Stabilizing a bit and what that means for SG&A for you guys kind of through 2022.

Speaker 4: Yeah, I would say just, you know, a big picture, Chris. I mean, SG&A, we would expect it to be up. I mean, really, really a couple of factors going on. We've got higher wages, as Rich talked about, some wage inflation that's going to be baked in there, higher incentive compensation as we would normally expect.

Yes, I would say.

Big picture, Chris I mean, SG&A, we would expect it to be up I mean really really a couple of factors going on we've got.

Our higher wages as rich talked about some wage inflation, that's going to be baked in there higher incentive compensation as we would normally expect when when earnings are growing and that sort of thing and then probably the last element would be just higher spending to support the sales levels and we do.

Speaker 4: when earnings are growing and that sort of thing. And then probably the last element would be...

Speaker 4: just higher spending to support the sales levels. And, you know, we do expect as we move through the year.

As we move through the year I would maybe call. It a gradual start to return to a more normal level of spending is as we start to travel again more regularly and that sort of thing. So there's various elements. So certainly a step up in SG&A, but I think I think when you look at it as a percentage of revenue because revenue would be.

Speaker 4: I would maybe call it a gradual start to return to a more normal level of upspending as we start to travel again more regularly and that sort of thing. So there's various elements. So we certainly step up.

Speaker 4: in SGNA but I think when you look at it as a percentage of revenue because revenue will be up quite a bit as well I think you will see pretty good consistency across SGNA in terms of as a percentage of sales from 21 to 22 so still not paying any

Up quite a bit as well I think you will see pretty good.

Pretty good consistency across our SG&A in terms of as a percentage of sales from from 'twenty, one to 'twenty, two so up but but.

More or less in line with the sales.

Speaker 12: got it got it thanks for the cousin guys that's a lot going forward here

Got it got it thanks for the color guys and best of luck going forward here.

Thanks.

And next well go to Stanley Elliott with Stifel.

Speaker 13: Good morning, everyone. Thank you all for taking the question. A quick question in terms of the order rates and things that you're seeing, have you all changed how you're processing these orders, meaning with supply chains being so convoluted and difficult? What's the risk at some point down the road that you're seeing a lot of double ordering? I don't think that's the case now or an issue now just given how lean inventories are, but curious if you've changed the thought process around that for when the environment does thaw a little bit.

Good morning, everyone. Thank you all for taking taken the question quick.

Quick question in terms of kind of like the order rates and things that you are seeing have you all changed how you're processing. These orders, meaning it was supply chain being so convoluted and difficult.

What's the risk at some point down the road that Youre seeing a lot of double ordering I don't think that's the case now or an issue now just given how lean inventories are but curious if you've changed the thought process around that for when the environment desktop a little bit.

Speaker 3: Um, yeah, well, certainly something we try to monitor and try to control and.

Yeah, well, it's certainly something we try to monitor and try to control.

And.

Speaker 3: You know, with OEMs, again, I think our digital platform is a big help for this. We've been shipping 1,000 bearings a week to an OEM, and all of a sudden they started ordering 2,000. You know, it's hard to imagine that their production rates are going up that level, and we're able to start a dialogue with them. I would tell you, I think that situation today is better than it was a year ago. There's less noise with that.

Yeah.

With Oems again, I think our digital platform is a big help for this if we've been shipping 1000 bearings, a week, two and OEM and all of a sudden they start ordering 2000, you know it's hard to imagine that their production rates are going up that level and we're able to startup.

A dialog with them I would tell you I think that situation today is better than it was a year ago, there's less noise with that.

Speaker 3: When this first took off, there was a bit of a panic, and let's just order more. And yeah, we're ordering more of this, but then we're running out of that. Inventory imbalances were worse.

When this first took off there was a bit of a panic and let's just order more.

And yeah were order more or less but then we're running out of that so things inventory imbalances were worse.

Speaker 3: And there's certainly risk to it, and I'm sure there's some of it happening, and on a small scale we wouldn't have the ability to, you know, control it on a small scale. But, you know, with distributors, we see their inventory levels, the big distributors, with OEMs, we have our sales people in there, know what they're building of the equipment. So, I think we've got a pretty good line of sight to it, and as Phil said earlier.

And there's certainly risk to it and I'm sure. There's some of it happening and on a small scale, we wouldn't have the ability to control it on a small scale.

But you know with distributors, we see their inventory levels. The big distributors are with Oems, we have our salespeople in there now what they're building and the equipment.

So I think we've got a pretty good line of sight to it and as Phil said earlier.

Speaker 3: You know, right now as far as I can see, it's a favorable trend for us that in general, I would say they would like more inventory and they need more inventory. They don't, so it's a good thing for us right now.

Right now as far as the eye can see it's a it's a favorable trend for us but in general I would say they would like more inventory and they need more inventory. They don't they so it's a it's a good thing for us right now.

Speaker 13: Sounds fair. Switched gears. Rich, you mentioned the M&A environment, expecting to be a little more active in the next couple of years. Are there larger deals still out there? Is this still going to be skewed towards the process side? How quickly do you think you can act on some of these deals? As you've obviously been harvesting, just curious what to expect in the next near term.

Okay that sounds fair and then switching gears rich you mentioned, the M&A environment and expect them to be a little more active.

The next couple of years.

Is this are there larger deals still out there of <unk>.

They're going to be skewed towards the process side.

How quickly do you think you can act on some of these deals you've obviously been harvesting just curious what to expect in the next near term.

Speaker 3: I think you slipped eight questions in on that one today. Sorry, I apologize. So I think yes, to definitely slanted the process, certainly, we're looking to mix mobile up as well, but automatically lubrication systems have a big mobile element and it's a great business.

Thank you slipped eight questions in on that one sorry.

Alright I apologize.

So I think yes to definitely slanted the process certainly we're looking to mixed mobile app as well, but in the lubrication automatic lubrication systems have a big mobile element and it's a it's a great business.

Speaker 3: But but slanted to process so the answer there is yes

But slanted to process. So the answer there is yes on the big ones I think the answer is no and one of the reasons two of the reasons why they feel.

Speaker 3: On the big ones, I think the answer is no. And one of the reasons, two of the reasons why I feel better about where we're going to be more active in 22 and 23 than we were in 20 and 21.

Better about where we're going to be more active in 'twenty, two and 'twenty three than we were in 2020 one 'twenty.

Speaker 3: You know, 20, we definitely slowed down from the pandemic, the shock, the travel, you know, concern, et cetera, you know, the pipeline pretty much dried up in the, you know, through the middle of the year and really didn't restart till late in the year. You know, and then I would also say we lost a little bit of ground. We, we worked on a couple of.

'twenty, we definitely slowed down from the pandemic are the shock travel we are concern et cetera.

The pipeline pretty much dried up and through the middle of the year and really didn't restart till late in the year and then I'll.

I'll say, we lost a little bit of ground. We we worked on a couple of potentially larger ones are that in the end, we backed out and.

Speaker 3: potentially larger ones uh... that in the end you know we backed out chose not to uh... pay the prices uh... that that they were uh... that they were going at

Chose not to pay the prices that they were that they were going at.

Speaker 3: And, you know, no regrets on that at all. And I think, you know, as we see today, we're back focused on...

And no no regrets on that at all and I think you know as we sit here today were back focused on.

Speaker 3: small to mid size, which I think was what we were really building some really strong capabilities on. I think the...

Small to mid size, which I think was what we were really building some really strong capabilities on I think the.

Speaker 3: If it did good niches, good technology, the synergies of the smaller businesses becoming a part of professionally managed corporation with this global scale we have, et cetera, I think is better than the large. And I think that's where we're focused. So we're not opposed to the big, and we looked at a couple of big, but we're focused.

If you get good niches good technology, the synergies of of the smaller businesses, becoming a part of a professionally managed corporation with this global scale, we have et cetera, I think is better than than the large and I think that's where we're focused we're not opposed to the to the bag and we looked at a couple of big.

But we're focused.

Say on <unk>.

Speaker 3: a sweet spot of 50 to $200 million revenue is where we're focused. And I do believe we'll get back, you'll see us get back into that this year and next.

The sweet spot of $50 million to $200 million of revenue is where we're focused and.

And I do believe we'll.

We will get back Youll see us get back into that this year and next and just maybe just a comment on top of that Stanley I think we look at capital allocation really the same way as rich said, probably a bias for M&A, but we do have the ability to buy back shares like we did in the fourth quarter. Our full year guide would assume sort of shares at fourth quarter levels. So we don't know.

Speaker 4: Yeah, just maybe just a comment on top of that, Stanley, I think, you know, we look at capital allocation really the same way as Rich said, probably a bias for M&A, but we do have the ability to buy back shares like we did in the fourth quarter. Our full year guide would assume sort of shares at fourth quarter level. So we don't normally include any capital allocation in the guide. So, if we were to do M&A, or to do any buy back, and we would report on it after the fact, and that would be accretive at the time, obviously buy back more immediate.

Molly include any capital allocation in the guide. So if we were to do M&A were to do any buyback and when we would report on it after the fact and that would be accretive at the time, obviously buyback more immediate.

Speaker 4: M&A a little bit more longer term, but I think we view both as viable options again with the bias towards towards the M&A.

A little bit more longer term, but.

I think we view both as a viable options again with the bias towards that.

Towards the M&A.

Perfect guys. Thanks, so much and best of luck.

Thanks Carolyn.

Speaker 1: And we do have a follow up from Ross Galardi with Bank of America.

And we do have a follow up from Ross Gilardi with Bank of America.

Speaker 7: Oh, thanks, thanks, guys, for taking it. I was just wondering if you could discuss just the mixed impact of renewables undergoing the rest of the portfolio and just maybe explain a little bit more about what's actually going on there in the wind markets. I mean, there's been a lot of development.

Thanks, guys for taking it.

I was just wondering if you could discuss just the mix impact of renewables under growing the rest of the portfolio and just maybe explain a little bit more about what's what's actually going on there and in the wind market.

A lot of developments.

Speaker 7: feels like globally with policy and China and subsidies and whatnot. But maybe you can just talk a little bit more about just U.S. versus China, onshore versus offshore and just how it impacts your business. Thanks.

Like globally.

With policy.

China in.

Subsidies and whatnot, but maybe you can just talk a little bit more about U S versus China onshore versus offshore and just how it impacts your business. Thanks.

Speaker 3: Yeah, first on the mix is we said before, you know, renewable energy does mix down process industries, but doesn't mix the company down. So it's probably some good mix happening within process with the other elements growing more this year while renewable flams out. But don't look at, we don't look at renewable as mixing the company down.

Yes first on the mix as we said before a renewable energy does mix down process industries, but it doesn't makes the company down.

So there's probably some you know some good mix happening within <unk>.

Process with the other elements.

Growing more this year, while renewable flattens out.

But don't look at it.

We don't look at renewable is mixing the company down.

And.

In total on the margin rate.

Speaker 3: You know, on the revenue, again, four straight years of double digits, I think last year our double digit was probably a little more self-help. I think the market, particularly in China, did soften in the second half. We were able to offset that, and we still grew in the second half. That being said, we saw the slowdown in China, in the market, and, you know, we've got a

On the revenue again, four straight years of double digits I think last year, our double digit was probably a little more self help I think.

The market.

Particularly in China did soften in the second half.

We were able to offset that.

Still grew in the in the second half.

That being said, we saw the slowdown in China in the market.

And we've got a.

Speaker 3: you know, flattish up a little bit down a little forecast right now. And that's really based on we expect to start the year down, not a lot, you know, single digits, but, you know, start the year down.

Flattish.

Little bit down a little forecast right now and that's really based on we expect to start the year down.

Now what low single digits, but start the year down.

Speaker 3: and that's largely from this slowdown in China. But we saw orders pick back up late last year and that continued into this year. So we're certainly getting the order flow to a minimum support that, if not beat that as the year goes on, we'll see. I think we're

And.

That's largely from the slowdown in China, but we saw orders pick back up late last year and that continued into this year. So we're certainly.

Getting the order flow to a minimum support that it's not.

It's not a beat that as the year goes on we'll see.

<unk>.

Sure.

Speaker 3: Offshore probably is a little bit favorable for us, but we're good with wherever it goes between offshore and onshore. We participate in both. I mean, generally, offshore tends to be bigger, more durable, and fits our value proposition even better, but our participation is fine in both. China definitely caused the global slowdown, if you will.

Offshore it probably is a little bit favorable for us, but where we are.

We're good with wherever it goes between offshore and onshore we participate in both I mean generally.

Offshore tends to be bigger more durable and fits our value proposition even better but.

Our participation is fine in both.

China definitely.

It caused the global slowdown if you will.

Speaker 3: But I remain very bullish on the China market and global market. When you look at the trends of what's happening with sustainability, what's happening with electrification, and what's happening with the

But I remain very bullish on the China market and global market. When you look at the trends of what's happening with sustainability, what's happening with electrification, which is going to drive not only the need for more power.

Speaker 3: which is going to drive not only the need for more power, more electricity, but for truly to be a movement in a sustainable direction, needs to come from renewable energy.

Power more electricity, but but for truly to be a little bit in the sustainable direction needs to come from renewable energy.

Speaker 3: very much look at the China situation as a pause, and it's a pause in growth too, right? It's not a pullback, so we're not...

I very much look at the China situation is a pause and it's a pause in growth two right. It's not a it's not a pullback. So we're not seeing any real decline in the market. It's a flattening.

Speaker 3: seen any real decline in the market. It's a flattened.

Speaker 3: and still pretty bullish about the next three or four years.

Still pretty bullish about the next three or four years.

Speaker 3: And, you know, we're a pretty small player in the U.S. market. There isn't much of a supply chain in the U.S. for this market. So, you know, our customers are not based in the U.S. or they don't produce in the U.S. So, for us, it's definitely an Asia and European market. And even what ends up in the U.S. generally comes from there. You know, we'll see how that market develops. But it's, you know, the U.S. has tended to be more stop and start than the rest of the world, which is why we focused on the rest of the world more.

And you know, we're pretty small player in the U S market there isn't there isn't much of a supply chain.

In the U S. For this market. So you know our customers are not based in the U S.

Producer in the U S. So for US, it's definitely a Asia and European market and even what ends up in the U S. Generally comes from there.

We'll see how that market develops but it's the U S has tended to be more stop and start than the rest of the world, which is why we focused on the rest of the world more.

Speaker 4: Yeah, as I mentioned in my comments, Ross, our CAPEX in 21 was up from 20 and we're gonna be higher in 22. And there was a fair amount of spend in that CAPEX plan for renewable energy in particular, as we continue to invest for growth as Rich said, as we're bullish on the markets long term. And also put in some pretty exciting manufacturing technologies to help improve manufacturing efficiency across those product lines.

Yeah, and as I mentioned in my comments for Us our Capex in 'twenty. One it was up from 20, and we're going to be higher in 'twenty two and there is a there was a fair amount of spend in that in that Capex plan for for renewable energy in particular as we continue to invest.

Invest for growth as rich said is we're bullish on the market's long term and also put in some some pretty exciting manufacturing technologies to help improve manufacturing efficiency across those product lines.

Thanks Scott.

Speaker 3: Who would make one more comment? I think the flattening of wind for a year. I mean, it also shows the strength of our diversity of our portfolio and...

I would make one more comment.

The flattening of our win for a year I mean, it also I think it shows that the strength of the diversity of our portfolio.

Speaker 3: You know, wind being up and solar being up as much as it was in 2020 was great for our portfolio when industrial markets were down. And not that I really want renewable to be flattening, but if, you know, it's a good year for that to happen, we can shift labor, we can shift materials, capacity, et cetera, into these industrial markets and serve them both. So I think it's, you know, it's strength of our portfolio that we've got a lot of things that move in different directions now.

Uh huh.

When being up in solar being up as much as it was in 'twenty was great for our portfolio in industrial markets were down.

And not that I really want renewable to be flattening, but if it's a good year for that to happen. We can shift labor, we can shift materials capacity et cetera into these industrial markets.

Serve them, both so I think it's a strength of our portfolio that we've got a lot of things that move in different directions now.

Speaker 2: Okay. Well, I think that's all the questions. Thanks, everyone, for joining us today. If you have any further questions after today's call, please contact me. Again, this is Neil Throneapple. Thank you, and this concludes our call.

Okay, well I think that's all the questions. Thanks, everyone for joining us today. If you have any further questions. After today's call. Please contact me again this is Neil thrown Apple. Thank you and this concludes.

Our call.

Speaker 1: Thank you and once again, that does conclude today's call. We thank you for your participation. You may now disconnect.

Thank you and once again that does conclude today's call. We thank you for your participation you may now disconnect.

Yeah.