Q4 2021 Titan International Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Fourth quarter cheapest 'twenty One earnings conference call. At this time, all participants haven't placed on listen only mode and we will open the floor for your questions and comments. After the presentation. If you should need the systems piece, though does it right and I'm not going to win.

Does this cheap it is not my pleasure to turn the floor over to Charles Church, Senior Vice President of Investor Relations and Treasurer for Titan Mr. <unk> the floor is yours.

Thank you Victoria.

Morning, and welcome everyone to our fourth quarter 2021 earnings call on the call. Today. We also have tightened as president and CEO , Paul Reitz, and tightened senior Vice President and CFO David Martin.

I will begin with a reminder, that the results. We are about to review were presented in the earnings release issued yesterday, along with our Form 10-K , which has also been filed with the Securities and Exchange Commission. This morning as.

As a reminder, during this call we will be discussing certain forward looking information, including the company's plans and projections for the future that involve risks uncertainties and assumptions that could cause our actual results to differ materially from the forward looking information.

Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward looking statements can be found within the safe Harbor statement included in the earnings release attached to the company's form 8-K filed earlier today as well as our latest Form 10-K and forms 10-Q all of which.

Which had been filed with the SEC.

In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release, which accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the non-GAAP measures.

To the most comparable GAAP measures. The Q4 earnings release is available on the company's website within the Investor Relations section under news and events. Please note today's call is being recorded a replay of this presentation will be available soon after the call within the Investor Relations section on the company's website.

A copy of today's call transcript will also be made available on our Investor Relations website.

In addition, our latest quarterly Investor presentation is available on our website I would now like to turn the call over to Paul.

Thanks, Todd and good morning, everyone Titan had a great finish to the year with our fourth quarter to what adds up to be a tremendous 2021 for us.

The days really go by fast as we're already sitting here into March and we see numerous positive aspects in our business winding up well for 2022 and beyond that.

I really wanted to comment, though that I'm I'm very pleased with what our tightened team has accomplished over the past couple of years and those efforts have put us in a good position as we head into 2022 today.

Today, I'd like to share some thoughts on markets and our expectations for this year, but before that I do want quickly want to go over a few financial highlights from 2021, and then David will of course dive in deeper to the financials would cover that from all angles. So as we look at the year. We grew our sales over $520 million with a solid $120 million of that are.

23% of that flowing into operating income gains that led to our 2021 adjusted EBITDA growing two five times over 2000 $20 million to $135 million. It's only happened one other time it tightens history that we have had sequential sales growth each quarter throughout the year, but that is exactly what occurred this.

Year.

I also want to note that our fourth quarter gross margin percentage was 300 basis points higher than our Q4 average over the past 10 years.

David will share more financial information later, but as I said I'm very pleased with what Tiger is accomplished in 2020 , one, but what's more important is that we feel well positioned going into 2022 to keep riding that tsunami tidal wave that's out there.

In the world of Agriculture, which is our bread basket comprising 53% of our sales. We believe the market forces are aligning well to create momentum driving a multiyear strong demand cycle. Some items of note farmer income and balance sheets around the world are looking good from higher commodity prices prior crop results have been strong.

Government support programs have been.

No very accommodating these forces will continue to pull through strong demand along with the fact that dealer used in new equipment inventories are at or near all time lows.

Also let's throw in there the continuing momentum from a replacement cycle that still has legs as North America large AG volume remains approximately 15% below historical average even after the recent growth.

You start looking at future crop prices the weather conditions in South America are helping to keep prices at higher levels is placing increased demand on U S screens, where reserves are light to start the year the point being of all of this there are clearly a good number of positive forces in the AG sector.

For example at the National Farm show just a couple of weeks ago. The comments I heard from management teams in particular at our small AG customers.

Where they see current demand and future forecast was really nothing but positive. So sitting here today tightened AG order books are strong and we are continuing to pursue pursue increases to our head count and our capacity to meet this demand.

So looking further down the road it doesn't appear that 2022 OEM production levels are going to put much of a dent in the low inventories low dealer inventories. So if youre looking at 2023 really before youre going to start getting meaningful inventory replenishment that could start taking place.

Plus on top of that I think youll see unmet 2022 retail demand that's going to carry forward into 'twenty three as well.

It does appear that positive AG wave is going to keep flowing on a multi year cycle.

So moving from farm over to Earth, moving construction, where our undercarriage business is a major global player. We continue to see demand and orders at really good levels. We stated last quarter and still believe that our EMC segment continues to look promising as you had the expected infrastructure investments kicking into this kicking into gear really this.

This year more likely than not you're going to see more of that continue to flow into next year as well that will just add further support to the current strong demand levels that we see.

On a global basis tightened was able to be there for our customers in 2021.

We see we have increased our output with our global production global production footprint that I want to remind everybody is the best and largest in the off road wheel tire and undercarriage industry.

I believe that with our production capabilities and our quality products along with the innovation that we continue to drive into the marketplace that we are prepared to serve our global customer base well in 2022 and beyond.

As companies move to further derisk their supply chains tightened is definitely better suited in the competition to meet our customers' needs.

We understand that in today's world there are questions surrounding global volatility uncertainty for material prices to supply chain labor challenges Global logistics and then the recent events in Ukraine as.

As we have noted before and you see evidenced in our 2021 results Titan is accustomed to solving problems and overcoming challenges and we have proven that we.

We have a strong focus within our management teams to meet our customer expectations, along with solid pricing and cost discipline and innovative products that will drive further margin and profitability improvements.

It's been great to see how our company has taken strong actions and really come a long way in improving our balance sheet. In recent years is obviously crucial to protecting the heartbeat in future of tightened.

As I've stated before during that period, we have continued to invest our capex wisely to drive innovative products into the marketplace and increase our capacity, we're really it's needed in our core businesses and it fits with our long term strategy.

That fact, combined with our large global production footprint and the capacity that we have which tightened in a position of strength within our industries and really makes us well suited to meet our customers' needs for the foreseeable future.

I also want to add a comment in there that in recent years, we have improved and remove businesses and product lines that were a drag on our financial results along with increasing our portfolio a portfolio of innovative products, we have streamlined our product portfolio to remove certain skus and improve our operational efficiencies.

All of these facts illustrate our capabilities and our future potential, but really what's speaks allowed us as a result of this quarter and really for all of 2021 for that matter that demonstrates that the tightened team has been successful in managing through a dynamic business environment and that we are well prepared for 2022 and beyond.

<unk> built a good foundation for the future and we have put an operating plan in place to deliver another good financial performance in 2022 with sales over $2 billion, which is 14% over 2021 and adjusted EBITDA around 175 million are up $40 million or 30%. If you look at it that way.

With that I'd now like to turn the call over to David.

Thanks, Paul and good morning to everybody on the call today.

Fourth quarter concluded very strongly and capped off a year that we are at Titan will all remember in the midst of unprecedented volatility we have set a course towards a bright future for the organization.

As a result of our collective decisions that we made in in 'twenty, one and even prior.

There are many foundational pieces that we established that will bear fruit for the years to come and our 2021 results are just the start.

As usual I'll begin with the major highlights for the quarter and the year for.

For the six quarter.

For the fourth quarter, we had a six quarter in a row of sequential sales growth.

Doesn't happen by accident as we put everything together to deliver increased production with our labor and our supply chain.

Net sales grew 8% sequentially from Q3, and almost 50% from Q4 last year.

This was led by the AG segment, which grew 64% in the fourth quarter from last year.

And our gross profit grew 68% from last year and our margins remained strong.

Yes.

The adjusted EBITDA for the quarter was 36 million, representing the strongest fourth quarter performance since 2013.

Our fiscal year, adjusted EBITDA was $135 million.

Which grew by an incredible $81 million.

This implies incremental adjusted EBITDA margins of 15, 6%.

On the cash flow and balance sheet side, our fourth quarter operating cash flow was $13 million, making the second quarter in a row, where we generated positive operating cash flow. Despite the large increases in sales and the corresponding working capital requirements.

And then finally, our net debt leverage fell to two nine times at year end.

And we expect an even stronger.

In 2022, which Paul already discussed and I'll touch on that a bit more in a few minutes.

Now, let's let's hit the important points relative to segment performance in the quarter, starting with agriculture. Our agricultural segment net sales were 265 million an increase over of over $103 million from Q4 last year and it was up sequentially from Q3 by over $20 million, representing eight 3% sequential growth.

We saw a very good balance between OE and aftermarket sales again this quarter, while Oes continue to drive that would be the largest driver of increases year over year.

There was also a very good balance between growth and volume and the impact of higher pricing related to cost of raw materials and other inflationary cost.

<unk> of our global regional businesses experienced significant growth in the segment year over year and for the year. The AG segment grew by over 50% or a $315 million in growth.

The agricultural segment gross profit for the fourth quarter was 37 and a half million dollars.

From only $20 million in the prior year.

Representing a 92% improvement.

Gross margins were 14, 2% for AG in Q4 up from 13, 6% in Q3 this.

This year and 12, 1% last year and this is reflective of the increased volume in the effect on efficiency along with continued strong cost control actions, we have taken over the last year, we are using our productive capacity in a strong way to support the demand in the market reinforcing our value to customers and that will continue in <unk>.

'twenty two.

Moving over to earthmoving, and construction segment experienced another strong quarter as well.

Overall net sales for the EMC segment grew by $46 million or 33% from.

From last year in Q4. This also compares favorably to the third quarter with sequential growth of $15 million or 9% very similar to the AG growth.

Again, all of the major geographies experienced year over year growth during the quarter with the largest dollar growth from Itm's undercarriage business, which grew 35% from the fourth quarter last year and 11% sequentially from the third quarter.

Similar to AG the growth was driven by a balance of volume and increased pricing relative to higher raw material costs and other costs of inflation during the quarter and it was slightly offset by currency devaluation of about 2%.

Gross profit and within our earthmoving and construction segment.

For the fourth quarter was $20 4 million, which represented an improvement of $6 1 million or 42% from adjusted gross profit last year after eliminating onetime charges for asset impairments last year.

The gross profit margin for the EMC segment was 11, 1% versus an adjusted gross margin from the prior year of 10, 4% again, the largest driver of increased profitability came from the increase in sales and 19 M.

While growth occurred across all of our businesses and geographies across the globe year over year.

The consumer segments Q4, net sales were up 41% or 11, and a half million compared to last year much like the rest of the year volume was up nicely in this segment, while currency was a slight drag in the quarter.

Our growth was balanced across all of our global businesses with the largest performed proportion coming in North America this quarter.

This segment's gross profit for the fourth quarter.

Was $4 6 million or $1 4 million increase from last year.

Gross margins were 11, 7% and again improved from Q4, 2020 margins, reflecting some positive mix and pricing improvements in our products.

Our selling general and administrative and R&D expenses for the fourth quarter were $35 6 million, representing only seven 3% of net sales for the quarter for the for the year adjusted gross adjusted SG&A and R&D costs were 8% of net sales. This year's expenses included some variable spending and.

<unk>.

Reflecting the significant increase in sales and profitability during the period that we control our spending very well and as a percent as a percent of sales. It dropped 220 basis points year over year after adjusting for onetime items last year.

Our reported taxes on income in the fourth quarter bear some color as a result of recent efforts to restructure our intercompany loan structure and realign our legal entities.

To reflect our operating model along with improved profitability in certain tax jurisdictions. We reversed previously recorded valuation allowances against net operating loss carryforwards, and the amount of $16 million in the quarter. Therefore on a net basis recorded a tax benefit in the quarter of $8 8 million.

Tax expense of only $1 1 million for the full year our.

Our cash taxes in the year were approximately $16 million in the range that I had communicated last quarter.

Let's move over to cash flow.

Let's start with the fact that our net debt level remains stable at $387 million from last quarter, our cash balances increased to $98 million, an increase of about $3 million from the end of Q3, we generated $13 million in operating cash flow in the quarter almost breakeven free cash flow as well.

After a tremendous growth in sales this year, we naturally invested in working capital, notably inventory to meet demand. Despite these.

These increases were able to generate positive operating cash flow of $28 million in the back half of the year.

Another important metric for our management team relates to liquid working capital, meaning our a plus inventory less AP.

At year end, our liquid working capital as a percent of annualized net sales based on the most recent quarter was 19%. This compares favorably versus the end of the third quarter when it was 21% and our last.

Last year end figure was 24%, we are making measurable progress with discipline and focus across the business.

Our debt leverage at the end of December was two nine times trailing 12 months adjusted EBITDA down from three three times last quarter.

We are in a comfortable position with leverage in this range with earnings growing in 2022 expected gain on.

Leverage ratio throughout the year, we have flexibility to run the business at these levels, including organic and inorganic growth initiatives.

We are into March now and it really feels like 'twenty or 'twenty, one is far behind us, but it is it is important to look back and reflect on the progress that we made during the year and how that sets the table for this year and beyond.

As Paul talked about earlier, our markets are strong and our position in it is as good as it's ever been we expect another great year at Titan and we are off to a great start in the first quarter. It bears repeating that we expect sales to exceed $2 billion and an EBITDA target is.

$175 million. This implies that gross margins will continue to expand and this comes with discipline that we have around our controllable costs or pricing to match inflation in raw material fluctuations that are inherent in our markets.

We expect SG&A and R&D costs, not including royalties to be controlled as well and about seven 5% of net sales for the year.

We also will remain very disciplined and focused on working capital management and as I have reviewed earlier.

And our targeted capital investments for 2022 based on our operating plan approved by the board, we expect to spend approximately $45 million to $50 million in capital investments, which is somewhat higher than last year, but relative to sales remains in the range of spending that we believe are appropriate for the business.

One of the most important takeaways from today's conversation is that what we expected that we expect to generate meaningful free cash flow in in the business. This year. Our current expectations are that we should generate between 35% and $45 million in free cash flow in 2022 based on current expectations and profitability working capital.

Assumptions and our capital investments.

We should start to see positive momentum in free cash flow generation as we progress through the year following our traditional seasonality with working capital requirements.

Positive free cash flow is important in this affords us the.

Optionality to balance growth initiatives with potential debt paydowns and even the potential for cash to shareholders.

Well, that's our story for now and I'm happy.

Happy to take Q&A are in in a minute and I'll turn it back over to Victoria for any questions you have today.

Thank you we will now begin the Q&A session to ask a question you May Press Star then one on your touch chain.

If youre using a speakerphone. Please pick up you had said the follow up question to Keith.

A question. Please press Star then two.

Yes.

And now our first question comes from Steve <unk> from.

Sidoti <unk> company. Please go ahead your line is open.

Good morning, everyone. Paul Davis I appreciate all the detail on the call I wanted to get a sense on that.

Much stronger sales in for Q4, our CIS, even three Q typically you've got some holidays theyre trying to think of how much you have caught up on the labor front in your production capacity as you go into what could be a stronger 22.

Are you prepared to.

The stronger sales and how you did it in <unk>.

Well, we've continued to execute on increasing our labor force, but I think.

Importantly, along with that as our Labor force continues to get stronger as that training continues.

Continues to sink in and their output levels increase and then the other element I would throw on top of that Steve is that we did get some new union contract signed that have incentive clause in North America. So look to continue to drive further improvements on an output as we move into 2022. So I think it's a combination of just really.

Executing on what we already have in place we have a good team that knows how to continue to recruit and retain people. We work hard at it and then you throw in the union contracts on top of it with the incentive clauses to help driving further output for for this year.

Okay.

When I think about David the guidance you gave for free cash flow I'm trying to sort of I'm looking at my model and clearly theres going to be.

The build in working capital won't be as steep even though you're going to have sales growth I'm just trying to think how you get there what are you going to do on the working capital side unless my other margin assumptions on margins are way off.

Well you know as you look through the.

How you model, we can certainly talk about that later, but.

We do have some impact from working capital you know we have some in some working capital growth built in but we don't believe that our inventory levels are and require significantly more investment than what were you where we have been we've been really working really hard to determine that that balance to manage our inventory and AR.

We're in pretty good shape, and we will see some growth in the first part of the year just because of the.

The natural claim that we will have that we will be able to start to see the benefits of that and start generating some good operating cash flow as we progress through the year.

Great. Thanks, and then just I've been getting a lot of questions I'm sure you have as well in terms of I mean, one if you can just walk through the RTI stock transaction, where your Russian venture stance now and just your general perspective thoughts on on the Russian venture given the current.

Russia, Ukraine conflict.

Yes, Steve.

David I'll take the first part we we did execute the stock repurchase.

Earlier in the month with RNA EIF. It was all according to everything that we needed to do from a regulatory standpoint and.

Obviously, it was well before this conflict started and we're in compliance with anything that relates to any regulatory matters sorry.

And we were able to complete that in early February .

And then Steve when you look at our business there as we've stated on prior calls I mean, we have a really strong management team there always been good at handling challenges and including the one day face now we've got a business that has a strong market share within the <unk> region.

We don't export a lot outside that region I think that's an item of note that is important as well we've talked about long term exporting more.

But really our business has a high market share within that region.

One item that I really think as important as what we've seen throughout the last couple of years around the world as the products that we produce are critical to not just the customers that we serve but really the societies in the overall food supply in the territories that we operate in.

Certainly that is true there.

At this moment, we are in compliance with all current sanctions relating to the Ukrainian situation. There is no material impact to our Russian operations are really our other tight facilities at this time.

And we'll continue to move forward from there.

Great. Thanks for that I'll turn it over and get back in queue. If I have additional questions. Thanks for that guys.

Thanks, Steve.

Perfect. Thank you Steve for your question.

Our next question comes from Cobalt Patel from Goldman Sachs. Please go ahead. Your line is open.

Hi, Thanks, so much and nice job this quarter and in 2021.

Thinking about 2022, and the visibility that you have.

After the consecutive quarters of strength that you have experience are you seeing any deceleration in your order book at this stage I know the backlog is still pretty strong, but if you could comment on the visibility and the rate of orders that are still coming in.

The visibility is strong the order book is strong and we're going to continue to work hard to produce as much as we can.

That works.

Maybe the second question is in light of the continuing challenges on raw materials supply chain labor et cetera.

If you could touch on pricing and any need to take on additional pricing.

Any kind of capacity that you think that you have additional room versus peers.

Pull that lever further if needed.

Yes.

You know obviously as we progress through 2021, there wherever required.

Adjustments that we needed to make the pricing.

Relative to not just raw material costs, but the logistics cost energy cost labor at all the different inflationary components and.

I would tell you that we have.

We work really well with our customers on giving them that transparency around our pricing.

Relative to those costs and we worked really well in 2021, and we fully expect that we're going to be able to do the same thing in 2022.

Yeah, and I think as far as our.

Our footprint is extremely strong in relation to meeting the needs of our customers and further derisking their supply chains.

So as we continue to add volumes clearly, it's a benefit into.

Two our efficiencies.

And we see that we need to continue to add capacity, we need to add labor.

Continue to add that capacity and the key core strategic areas, we're not trying to veer off into anything new or different or chase volumes that you.

Maybe in the past, we havent been focused on so I think we just remain disciplined as David said with our our costs in relation to our pricing will continue to work hard to as I said in my previous response to increase our output to meet the needs of our customers and we see.

Good order books for 2022, but really when you look at all the positive forces out there, especially in the AG sector.

We think this tidal wave has got a multiyear leg to it and we see this continuing into 2023 and beyond as well.

Great if I could squeeze one more in and leverage has come down a lot too.

Nine versus your three or four times range.

Again, it sounds like your comments are pretty positive on the outlook there.

I know in the capital allocation comments, you had mentioned some potential share repurchase.

Just elaborate on that could that be potentially debt funded.

If you could shed some light that that'd be great.

Yes.

We.

Still need to have conversations and make decisions around that as the cash flow warrants.

We haven't made any decisions one way or another at this point in time.

The point is that we have the option we.

We have the optionality to work around the variety of components, you know, obviously, you're investing in the business.

Paying down debt that we where we feel it's warranted or opportunistic and then but then the potential for shareholder returns.

Got it that's fair thanks, so much for the color.

Yes.

Thank you so much for your question and our next question comes from Nick <unk> from Imperial Capital. Please go ahead.

Good morning, guys.

Hey, good morning.

Thanks for the call and the updated presentation.

Very helpful.

[laughter].

Just a quick follow up on the capital allocation topic is the <unk>.

Three to four times still your target.

Range.

I would just say that we're in a very healthy range and we have opportunities to do the right things for all of our constituents. We do feel obviously a lot more comfortable with three to four times and we're going to be in the in the lower.

Below three here for a bit of time as well and we'll obviously look at the right things to try to drive returns in a better way.

With that yeah.

With that comfortable level.

Alright, thank you.

So there was a time when you were hoping to get to three to four.

Now you're below it looks if I'm doing the math right without any distributions to shareholders, you'll be closer to two times at the end of 'twenty two.

Yeah.

So does that three to four move down.

I mean would you would you prefer to run the business.

As a.

They are double double b as opposed to a single B type credits.

Mhm.

Well, obviously, I love better credit and as a CFO I always love and want to be in a comfortable range and but again I want to thank make sure that we and our board are totally aligned as to what we're doing to try to drive returns for the long term.

That may mean, some investments in the business to try to try to drive that and but again I feel like if we stay in this three times range that we have the options to do that.

Okay.

Do you think of leverage.

As a over the cycle or.

Or I mean, how do you think about your your leverage it.

You know it is still a cyclic even though you are on an upswing and you think it's a multiyear run I mean, you are still it is a business where earnings have been.

They have been volatile historically I'm just curious how you think about leverage.

I want to be able to maintain the levels of leverage that we have.

That we have done through a cycle, we haven't had a long cycle of any sort over the last number of years, it's been more challenging so I do view it over the cycle versus just a moment in time.

So.

Okay got it thank you and.

I think theres a lot of concern about maybe.

A recession in Europe and Asia.

Slide four is very helpful.

It shows you know where your facilities are located in none of them other than the Russian tire plant that are in the.

And it looks to be in a war zone, but do you have a sense for when this might you might not have the visibility, but do you know where your facilities are.

Are you obviously, you know where your facilities are but where does the where does your equipment, whereas it actually use do you have any visibility into that.

We we know where our products are shipped to I think you'd have to look at the follow through from our main customers to see exactly where its used we're going to follow those trends as to where the equipment actually gets used at our main customers but.

To answer your question, specifically, no we shipped directly to their points of manufacturing and assembly.

Got it.

Any any comments on what.

What you what you see or what you expect to see.

In the.

Ukraine. This planting season is it just too early to say what.

What's happening there.

Yeah. It really is I mean, it's too early to say I think what we're what we're looking at is obviously the commodity prices you look at the current inventories in the U S or why you look at the South American situation, where their yields are going to put some pressure on on other areas. So I think in a broader scope where look.

At farmer incomes were looking at commodity prices and all of that is very strong how that all gets sorted out with production.

And where the production ends up getting exported too it's still too early to tell on that.

Got it and then lastly, thank you and then lastly.

Does the does the agreement with <unk>.

Boto.

Does that improve utilization rates or how does that affect your financials, and then I'll I'll I'll hand, it off I appreciate it. Thank you.

Absolutely it's a win win for both sides I think it's something we're very excited about it.

Kubota has a product that will be.

We have a new product when we say it differently, we have a new product that we're going to be partnering with kubota it'll be private labeled with kubota. So it would be good for not just their end users, but also their dealers.

It's a good win win for us as far as our plants and improving our efficiencies for them improving their capability to connect with their customers.

Again, all around a really good deal something we're excited about and it's a great way for us to position a new product into the marketplace with a leading customer in that space as well.

Great. Thank you very much.

Yes.

Perfect. Thank you for your question. Our next question have Sean <unk>.

It's been well Carlson. Please go ahead.

Hey, Thank you for taking questions from shareholders.

Can you talk about is it 10000 foot question.

<unk>.

10 years ago, we had over $2 billion of sales and the EBITDA profile of those.

Sales were different and obviously 10 years in the past, but can you just help people understand what the difference is now.

Versus 10 years ago.

And how it aligns with your thinking around $175 million of EBITDA.

Yes, absolutely.

When you look at our company today.

Bread basket is agriculture, and as we stated it's 53% of our sales is coming from that.

Back 10 years ago, you would have seen more coming from the EMC segment as far as our profitability goes. So when you look at our EMC segment today is primarily driven by ITM, our undercarriage business. So ITM undercarriage is a strong global leader a tremendous OE.

<unk> brand and product good aftermarket presence that continues to grow strong foundry there in Spain, and so it's a good diversified business that you see now making up the.

The bulk of our EMC sales and earnings.

And when you look at our Ag's AG sales in earnings you see good strong businesses that have very very solid market, leading products and market share. So it's primarily going to be based upon wheels and tires.

So there is a definitely a different mix what you see today versus what you see 10 years ago, what where I see things today as our earnings are coming from good strong core businesses and so on.

These are not areas that we are stretching out into a lam, we're trying to to reach into cracks in the marketplace. We're growing our business around our core businesses, and that's where I see things today.

And certainly where we see things going forward in the near future as we've outlined with our guidance for 2022.

Okay. That's helpful and a separate topic I think with a lot of industrial companies that have reported we've been hearing lots of things about.

Supply chains for all material availability labor.

The issues are still dealing with a I don't think we spoke at length about those but maybe can you help us understand what makes Titan have.

And ability to execute.

Well in 2022, you spoken about unions in the past labor availability. There can you talk about how you're situated from a labor perspective and by no means I wanted to simplify your business but.

Making a tire, making a wheel making metal parts.

It seems like there's a lot of steel has a lot of rubber butadiene steel.

Steel cord is readily available so yes.

Can you just update us in terms of your view of the.

Logistics supply chain and labor as it relates to 2022 and and how it's going to allow you to execute well going forward.

Yeah, I mean, it starts with the team that we have we have a really strong one tightened global team.

We've been talking about that for a number of years, even during the downtime. We kept references we're building a good strong foundation with the team that we have.

And as I've noted on not just todays call, but in prior calls them could not be more pleased with how our team has operated.

Across a very dynamic business environment as you illustrated there is theres a lot of moving pieces out there in today's world and hear it tightened it.

<unk> starts with our people and our team.

We've done a very good job.

Over the last couple of years with the challenges that are put in front of US. We continue to see these challenges on a weekly basis, just like every other company.

But as a team we're very good at dealing with those issues were managing our customers well, we're here to serve our customers with our strong production footprint strong quality innovative products that we have and it's all wrapped around the umbrella of a really good global one Titan team.

Really what I would point to as you see evidenced in our 2021 results how we've been able to perform through these these these are challenging times and.

We continue to believe that the one Titan team will continue to execute as we have.

Okay. That's helpful and then as it relates to the guidance and I understand it's things that are probably changing in real time.

Historically, you've disclosed the revenue contribution for the Russian operations, but as it relates to <unk>.

$75 million EBITDA guidance are you willing to disclose your expectations for the EBITDA.

Mix within that 175% that relates to the Russian operations.

We only report based upon the segments as you see in our results now in our 10-K to disclose that the Russian business comprises roughly 5% of our overall total sales.

But as a general practice are completely unrelated to what's currently going on with that situation. We just do not disclose by business units.

Any any information beyond what you would see in the 10-K related to sales so.

Really how we look at our business is based upon farm.

Earth moving construction and consumer so you know at this time, we can really just refer you to the 10-K, where you see 5% of our sales come from Russia.

But certainly that's all thanks for taking my question.

Well one comment I'll make is yeah, certainly, it's all factored into our 2022 guidance, though.

We're taking all that into account.

Okay. Thank you for taking my questions.

Okay.

Perfect. Thank you for your question.

Again, if you have a question. Please press star one on your question Pat that's a start on that one.

Okay.

And our next question comes from.

Blanton from clear Harbor investment management. Please go ahead.

Hi, good morning.

Congratulations on the quarter.

Just wanted to clarify the tax benefit what would your taxes have been was that the benefit.

For the quarter it would have been.

Roughly about four to 5 million I believe.

The.

Did you say $4 5 million.

No I said I said I just got clarification from her chief accounting officer. So I. He he told me that it would have been $8 million for the quarter.

Okay.

Eight.

$8 8 million even eight.

$8 million roughly.

And when is it expected what's your tax rate expected to be this year.

Well, here's what I would say because there can always be variation with respect to book taxes, because of the valuation allowances and those kinds of things I do expect cash taxes, which is the most important piece of this to be around $16 million.

Russell.

Well I am just wondering what are your tax your mother trying to emulate it in the income statement.

I'm interested in what taxes will be what the tax rate will be in the income statement.

I don't have that up top my head Alex I can get it for you later, but you know like I said about $16 million is that the expectation.

Well.

Now what you're paying what what's going to be in the income statements what I'm interested in.

That's roughly it.

Before any special allowances that we might be able to take or any benefits that we have we can take as well so that they have that desert.

That is the expectation and I'll give you for now.

<unk> okay.

Okay.

That's kind of a REIT tax rate.

I understand you can do the calculation and your modeling, though can't you.

[laughter] well I have to know what pre tax is going to be to get the right.

That's not part of our guidance so.

Okay, well then let's go on.

Yeah.

The tax benefit is included in the adjusted earnings.

Yeah.

Yes.

Yeah, So if I.

Yeah.

If I apply a 25% tax rate to the tune of <unk> income.

Our earnings come out about 18.

Correct.

I believe that's the math, yes.

Yes, so why why didn't you adjust the earnings for the <unk>.

<unk> benefits.

We could have.

But why didn't you.

Yeah, I mean, we've had variation in that.

In adjustments related to valuation allowances in fin 48 adjustment for a long time. So it's not it's just not been there.

But those variations throw your earnings out of Kilter.

Purpose of adjusted earnings is to smooth out these things and presented a more realistic number. So I'm just wondering why you didn't do that.

Again as standard practice has not been to adjust it so I'll just I'll leave it at that.

It is clear in the numbers that we outlined though.

In our remarks and the press release.

Okay, Let's go on.

<unk>.

The incremental 23% for the year and the operating earnings that you talked about at the beginning.

Do you think that's sustainable.

Going forward or do you expect it might increase.

Yeah.

Inherently in our guidance for 2022 and that is the case you know it could vary around that number but we have good expectations for continued efficiencies across the business as a result of all the things we put in place last year and yes.

That's implied in our guide is that margins will continue to expand.

Yeah, that's an operating incremental that's pretty good.

So you think you can sustain that going forward at least for a while.

Yes, yes, I mean, clearly when you get close to peak capacity that it tends to go down but.

The pathway to you as well.

Well, Alex I think that's the point, we're trying to.

Illustrate with some of our comments and certainly I know our customers. Appreciate this but we do have the production footprint and the capacity to continue to grow get more efficient so inherent in what we talked about in 2022 is that we will continue to improve as a company with our efficiencies as I as I mentioned earlier.

Well and we put out a press release on it I mean, we.

We very much look forward to our North American Union contracts with some some new incentive clauses that we put in there.

That.

Will will only help improve.

The output that we can get from our plants on a on again, a more effective efficient basis as well.

Yeah.

On the commodity.

Brent Tomorrow.

Commodity prices are benefiting from the fact that.

The Russia, and Ukraine are major producers of grain.

We and even corn soybean oil.

And.

And those are obviously going to be.

In shorter supply than they would've been.

Do you see that.

Are you taking that into account in your guidance that the commodity prices are going to be.

Higher as a result of what's going on in Russia at least for now.

Well I think what's implied in our guidance is not just based upon one particular characteristic and that's what we see in the marketplace with our comments referencing it being a multi year cycle. There there are a number of positive attributes that exist.

That will continue to propel this market forward, so theres not one.

One pillar that could fall that crumbles the entire the entire agricultural space at this point. So I think you really got to look at it in its totality instead of trying to predict where commodity prices are going and is that going to have a direct immediate impact on on demand, but you've got to look at the big picture and just see all those positive forces that are out there Alex.

Whether you talk about just commodity prices inventory levels retail demand.

This is this has got some legs on it because of a number of forces. So I think regardless of where commodity prices go instead of trying to predict a precise level I think my comments with this.

My belief I should say not even my comments my belief as commodity prices are going to remain at very good levels that will continue to provide a supportive environment for agriculture not to mention the balance sheets of farmers are ready strong yeah. So again I think you've got to look at the big picture on that Alex and the answer becomes pretty evident.

Yeah.

Now on Russia, you said that you're not going to really comment on.

The.

What might happen there.

What what I, what I look at an end.

We've said this before I mean, we just have a really good leadership team over there. We worked together now for a number of years, our business has high market share.

And as we've seen throughout the pandemic our products are critical to the infrastructure and the agricultural needs of that not just that society, there, but the whole CIS region. So.

We are in compliance and it's an evolving situation will continue to monitor it but really.

Really don't see anything more beyond that Alex.

Yeah, just one more thing on that does that business is.

Is it mainly domestic.

And it wouldn't be affected by export controls.

That's correct where primary to operate in the CIS region that is correct.

Yeah. So you don't know.

We'd be affected if.

If there are sanctions against exports that wouldn't affect you.

No we primarily operate within the strong agricultural region. They are in the C. I S. So we have talked on previous calls just to be clear about the ability for that that operation to export more in the future but at this current time the demand has been very strong in the CIS region.

In recent times, and so that's primarily where our production and our footprint is.

Yeah, Okay, alright, thank you very much.

Thanks, Alex Alex.

Perfect. Thank you Alex for your question.

Our final question comes from Jack void from velocity asset management. Please go ahead.

Hey, guys. Thanks for taking the question.

Hugh you dived into this a little bit but.

5% of sales came from Russia in 2021.

Is that all rubber.

And then my second question is you disclosed 22% of sales come from Europe does that include any Russia or Ukraine exposure.

Go back to your first question.

Okay.

Jack.

You you said that it was.

Russia is about 5% of our sales.

Again that is rubber that has taught those are tires and then if you look at Europe .

There is there's very little if any Ukrainian sales.

That were in 2021 is just not a big part of what we do.

Our sales are really within the Western Europe , and then within the C. I S region for tires.

Got it. So you mentioned you don't export a lot out of Russia.

Assume that means finished product or are you guys exporting rubber out of Russia to two other continents to make finished product and if so.

What percentage of your rubber production is Russia is Russia.

Yeah, we do not export rubber for other parts of the world.

Simply put got it.

And then you talked a little bit about capital allocation in your 2022 guidance is implying a pretty significant amount of levered free cash flow.

Talks about returning that to shareholders over time, so how do you think about potentially implementing a dividend versus buying back stock.

Yeah, all of the options around the table, we have not made any decisions at this point in time, but again, we have that optionality and we'll make.

In concert with our board will make the right decision at the appropriate time.

Got it helpful. Thanks for the time congrats.

Thank you.

Perfect. Thank you Jack Great question.

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

Well I just wanted to thank everybody for their participation in our Q4 earnings call and look forward to touching base with you soon thank you.

Thank you for attending today's presentation. The conference call has now concluded.

Yeah.

Uh huh.

Uh huh.

Yes.

Yeah.

Okay.

Okay.

Yes.

Yeah.