Q4 2023 Titan International Inc Earnings Call

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Operator: Ladies and gentlemen, please remain standing. The conference will begin momentarily. Again, please remain holding. The conference will begin momentarily. Good morning, ladies and gentlemen, and welcome to the Titan International Inc. fourth quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for questions and comments after the presentation. If you need assistance, please disconnect and dial back in, and an operator will assist you.

Ladies and gentlemen, please remain holding the conference will begin momentarily again, please remain holding the conference will begin momentarily.

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Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Fourth quarter 2023 earnings Conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for questions and comments after the presentation.

If you need assistance, please disconnect and dial back in and an operator will this issue.

Alan Snyder: It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is now yours. Thank you, Juquita. Good morning.

It is now my pleasure to turn the floor over to Alice Ryder, Vice President financial planning and Investor Relations for Titan.

Mr. Snyder the floor is now yours.

Thank you Lisa good morning, I'd like to welcome everyone to Titans fourth quarter 2023 earnings call on the call with me today are Paul Reitz Titans, President and CEO, David Martin tightened senior Vice President and CFO.

Alan Snyder: I'd like to welcome everyone to Titan's fourth quarter 2023 earnings call. On the call with me today are Paul Reitz, Titan's President and CEO, and David Martin, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued this morning, along with our Form 10-K, which was also filed with the Securities and Exchange Commission this morning. 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 in the Safe Harbor Statement included in the earnings release attached to the company's Form 8K filed earlier, as well as our latest Form 10K and Forms 10Q, all of which have 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.

Again with a reminder, that the results. We are about to review were presented in the earnings release issued this morning, along with our Form 10-K, which was also filed with the Securities and Exchange Commission. This morning 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.

<unk> as well as our latest Form 10-K and forms 10-Q, all of which have 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.

Alan Snyder: 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. A replay of this presentation, a copy of today's transcript, and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul. Thanks, Alan, and good morning, everyone.

Financial and other quantitative information to be discussed today as well.

Well as the reconciliation of the non-GAAP net measures to the most comparable GAAP measures. The Q4 earnings release is available on the company's website.

Replay of this presentation a copy of today's transcript in the Companys latest quarterly investor presentation will all be available soon after the call on <unk> website.

I'd now like to turn the call over to Paul.

Thanks, Alan and good morning to everyone.

Paul George Reitz: As all of you have hopefully seen by now, along with the announcement of our Q4 and year-end earnings this morning, we announced the acquisition of Carlstar. That's a complicated word to try to say.

As all of you have hopefully seen by now along with the announcement of our Q4 and year end earnings. This morning, we announced the acquisition of Carl Star.

This is an accretive transformation transformative transaction for us that's a complicated where to try to say.

Paul George Reitz: The addition of Carlstar will significantly expand our customer base and product portfolio while also adding key manufacturing and distribution assets. With that in mind, I'm not going to spend as much time as normal on our Q4 and year-end results today, as our business going forward will be sustainably different. Instead, I will focus my remarks on the strategic rationale for our acquisition of Carl Starr, along with some brief discussion of market conditions. Then David will provide comments on our reported results, the financial aspects of the Carl Starr transaction, and then, of course, we'll have time for questions. Instead of calling it a transformative transaction, I should have just said we're really damn excited for the opportunity to make the Carl Starr team part of the Titan family. Similar to Titan, Carl Starr is a global manufacturer of specialty wheels and tires. The primary end markets for the products are outdoor power equipment, power sports, high-speed trailers, and smaller agriculture equipment. Power sports, trailers, and outdoor power equipment are verticals where Titan has not competed in recent years.

The addition of Carlos Star will significantly expand our customer base and product portfolio, while also adding key manufacturing and distribution assets.

With that in mind, I'm, not going to spend as much time as normal on our Q4 and year end results today as our business going forward will be sustainably different.

Instead, I will focus my remarks on the strategic rationale for acquisition of Carl Star along with a brief discussion of market conditions.

David will provide comments on our reported results the financial aspects of the car Star transaction and then of course, we'll have time for transact for questions.

Instead of call. It a transformative transaction I should have just said, we're really damn excited for the opportunity to make the Carl Star team part of the Titan family.

Similar to Titan Carl Star is a global manufacturer of specialty wheels and tires.

Our primary end markets for the products, our outdoor power equipment power sports high speed trailers and smaller agriculture equipment power.

Power sports trailers, and outdoor power equipment or verticals, where Titan has not competed in recent years, so adding Karl <unk> product portfolio in those end markets will add some meaningful diversification to our business.

Paul George Reitz: So adding Carl Starr's product portfolio in those end markets will add some meaningful diversification to our business. In addition, Carl Starr maintains strong relationships with a number of key national retailers and commercial servicing dealers. Carl Starr has built a one-stop shop and a connection to customers in their three key segments that is unparalleled. Titan has done the same in our key segment, large ag, where we offer an unmatched arsenal of wheels and tires with a strong connection to our customers and end users. Titan and Carl Starr are better together, and we're excited to add these new customer relationships and products to Titan's business. It's no secret that agriculture and construction industries are cyclical, so the addition of these more retail-centric categories is something we expect will benefit the consistency of our sales, margins, and profitability over time by reducing some of that cyclicality. Carl Starr has simply spent years developing a secret sauce.

In addition, Carl Star maintain strong relationships with a number of key national retailers and commercial servicing dealers.

Carl Star has built a one stop shop and a connection to customers and there are three key segments that is unparalleled.

It has done the same in our key segment large AG, where we offer an unmatched arsenal of wheels and tires with a strong connection to our customers and end users.

Titan and Carl Star are better together and we're excited to add these new customer relationships and products into Titans business.

It's no secret the agriculture and construction industries are cyclical. So the addition of these more retail centric categories is something we expect will benefit the consistency of our sales margins and profitability over time.

Reducing some of that cyclicality.

Carl Star has simply spent years developing a secret sauce.

Paul George Reitz: I'm going to use the word one-stop shop repeatedly because they have done a tremendous job in the three segments where they operate, again building the secret sauce around this business model. Part of that The formation of that secret sauce is Carl Starr has built a world-class portfolio in specialty areas such as outdoor power equipment, turf, ATV and UTVs, power sports, and high-speed trailers, along with ag products primarily for smaller equipment such as tractors, backhoes, and implements. This portfolio dovetails well with our existing Titan lineup. Although we do have some products in these channels, our bread and butter, Titan's bread and butter, has really been innovating the larger wheels and tires that go on the biggest tractors and combines. Going forward, we really think our combined product line will feature the best-in-class offerings in these segments.

I'm going to use the word one stop shop repeatedly because they have done a tremendous job in the three segments, where they operate again building the secret sauce around this business model.

Part of that.

The formation of that secret sauce is Carl Star has built a world class portfolio, especially areas such as outdoor power equipment.

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<unk>, ATV and Utv's power sports and high speed trailers, along with AG products, primarily for smaller equipment, such as tractors backhoes and implement.

This portfolio dovetails, well with our existing tightened lineup.

Although we do have some products in these channels are bread and butter tightens bread and butter has really been innovating the larger wheels and tires that go on the biggest tractors and combines.

Going forward, we really think our combined product line will feature the best in class offerings. In these segments. We are pleased really pleased to be extending our market leadership, there and to be able to offer the product portfolio that I just mentioned.

Paul George Reitz: We are pleased, really pleased, to be extending our market leadership there and to be able to offer the product portfolio that I just mentioned. While we are excited for these top-line opportunities with a broad product base, we are really excited about Carl Starr's business model, which connects its manufacturing and distribution assets with third-party producers in a very effective and efficient manner. Carl Starr has a plant strategically located in Meizhou, China that has a long history with an incredible, knowledgeable workforce and access to lower-cost materials. Carl Starr's three U.S. facilities, two in Tennessee and one in South Carolina, fit well with our existing production base, which is located primarily throughout the Midwest. The Carl Starr locations, in combination with Titans, form a manufacturing base that can produce an extensive product portfolio that, as I mentioned earlier, is unmatched in our industry, while also providing value-added risk mitigation to our valued customers. Complementing that manufacturing platform is Carl Starr's one-stop-shop operating approach.

While we are excited for these topline opportunities with a broad product base. We are really excited about Carl Starz business model that connects their manufacturing and distribution assets with third party producers and a very effective and efficient manner.

<unk> has a plant strategically located in Beijing, China.

A long history with an incredible knowledgeable workforce and access to lower cost materials.

Carl stars three U S facilities, two in Tennessee, and one in South Carolina fit well with our existing production base.

Located primarily throughout the Midwest.

<unk> locations in combination with tightened former manufacturing base that can produce an extensive product portfolio and as I mentioned earlier is unmatched in our industry.

While also providing value added risk mitigation to our valued customers.

Complementing that manufacturing platform is Carl stars one stop shop operating approach.

Paul George Reitz: You're going to keep hearing that word a lot because, from the very beginning, I've been impressed with learning more about their market approach and how they develop this connection to customers from the outside. I've been watching it for many years, but again, getting to know the team and the process is associated with this one-stop shop. It truly is their secret sauce.

Keep here and that word a lot because from the very beginning.

I've been impressed with learning more about their market approach and how they develop this connection to customers from the outside I've been watching it for many years, but again getting to know the team and the processes associated with this one stop shop. It truly is their secret sauce.

Paul George Reitz: We're looking forward to the addition of the 12 distribution centers that are connected via an extensive sales, inventory, and operating planning process. This allows them to deliver products to their customers in a timely manner, regardless of the source of origin. Internally managed, their D.C. locations are in key strategic areas, including the Central and Southern U.S., where their domestic manufacturing facilities are, as I mentioned previously. And they also get good penetration out on the west coast and up into Canada.

We're looking forward to the addition of the 12 distribution centers that are connected via an impressive sales inventory and operating planning process. This allows them to deliver products to their customers in a timely manner, regardless of source of origin.

Internally manage their DC locations are in key strategic areas, including the central and Southern U S.

Where their domestic manufacturing facilities are as I'd mentioned previously and they also get a good penetration on the west coast and up into Canada.

Paul George Reitz: Overseas, the acquisition adds a distribution center in Hungary. This is a good opportunity for Titan to expand its existing market penetration there. All in all, we like how well Carl Starr is vertically integrated and look forward to having these operations in house. As I noted earlier, Carl Starr's business is more retail-oriented than Titan. Approximately 75% of Carl Starr sales fit within Titan's consumer segment, with the remaining 25% going to agriculture and construction.

Overseas acquisition as a distribution center in Hungary. This is a good opportunity for tightened to expand our existing market penetration there all in we like how well Carl stars vertically integrated and look forward to have in these operations in house.

As I noted earlier <unk> business is more retail oriented in Titans, approximately 75% of Carl Star sales fit within tightened consumer segment with the remaining 25% going to.

AG and construction.

Paul George Reitz: Retail, and even some smaller ag, is less correlated with commodities, and as such, we expect to see our annual revenues going forward have less volatility than they have in the past. As you can see from a strategic perspective, Carl Starr is a strong fit with Titan. And we are really eager to start rolling up our sleeves to integrate the operations into Titan's business but really dive into the growth opportunities that exist for the Carl Starr and Titan team as we move forward. David will get into details a bit more in a moment, but I want to highlight the fact that we were able to do this deal at a fair valuation that is around four times adjusted EBITDA. It's creative, and it leaves our balance sheet in good shape. Over the past couple of years, the Titan team has worked hard to reduce our leverage. And between that and the modest use of our asset-backed revolver to help fund this acquisition, our post-deal leverage is still very manageable at 1.3 times.

Retail and even some smaller AG is less correlated with commodities and as such we expect to see our annual revenues going forward have less volatility than they had in the past.

As you can see from a strategic perspective, Carl Star is a strong fit with Titan and.

And we are really eager to start rolling up our sleeves to integrate the operations into our into Titans business, but really dive into the growth opportunities that exist for the Karl Star and tightened team as we move forward.

David will get into the details a bit more in a moment, but I want to highlight the fact that we were able to do this deal at a fair valuation that is around four times adjusted EBITDA.

It's accretive and it leaves our balance sheet in good shape.

Over the past couple of years. The tightened team has worked hard to reduce our leverage in between that and the modest use of our asset backed revolver to help fund. This acquisition are post deal leverage is still a very manageable one three times net based upon pro forma combined company profitability.

Paul George Reitz: And that's based on pro forma combined company profitability. Before handing it off to David, I do want to touch on market conditions. As many of you have heard from the market leaders in the ag and construction equipment sectors, expectations for 2024 would be best described as conservative or softer. This is really being driven by the expected declines that are taking place in farmer incomes, combined with global uncertainties from grain supply, government actions, and really overall geopolitics. All that's just weighed on current demand.

Before handing it off to Dave, but I do want to touch on market conditions as many of you heard from the market leaders in the AG and construction equipment sectors expectations for 2024 would be best described as conservative or softer.

This is really being driven by the expected declines that are taking place in farmer incomes.

Combined with global uncertainties from grain supply government actions and really overall geopolitics.

All of that's just weighed on current demand.

Paul George Reitz: At the same time, the destocking dynamic that impacted 2023 has run its course, so we are starting this year with inventories in a more normal state. With that, we expect ag market activity over the balance of the year will be down, as driven by commodity prices.

At the same time, the Destocking dynamic that impacted 2023 has run its course, so we're starting this year with inventories in a more normal state.

With that we expect AG the AG market activity over the balance of the year will be down is driven by commodity prices again.

Paul George Reitz: Again, nothing new or earth shattering with that comment as really being driven by the impact, as we've seen in North America from farmer incomes. But we do see 2024 having less impact from the headwind of lagging inventory that has been in the channels throughout 2023. You know, let's not forget amidst the current market noise that North American farmer balance sheets and land values are still very strong, which bodes well for future prospects as compared to cycles from prior decades. Wrapping up, 2023 was a solid year for Titan, and I'm proud of our ability to navigate challenges, serve our customers, and maintain our margins. The plan we put into place a number of years ago centered around our one Titan team has proven itself and is gaining momentum with our dedication, commitment to each other, and relentless focus on serving our customers.

Nothing new Earth shattering with that comment.

That's really being driven by the impact.

We have seen in North America from farmer incomes, but we do see 2024, having less impact from the headwind of lagging inventory that has been in the channels throughout 2023.

Let's not forget amidst the current market noise that north American farmer balance sheets and land values are still very strong.

That bodes well for future prospects as compared to cycles from prior decades.

Wrapping up 2023 was a solid year for Titan and I'm proud of our ability to navigate challenges serve our customers and maintain our margins. The plan, we put into place a number of years ago centered around our one Titan team has proven itself and is gaining momentum with our dedication commitment to each other and relentless focus on serving our.

Paul George Reitz: I want to thank the Titan team for all their efforts during due diligence to get the Carl Starr transaction over the goal line. All that hard work is making our flywheel turn and is showing in our financial performance and our ability to seek growth. In closing, I would like to welcome the Carl Starr team to the Titan organization. It's clear they are a really good group of people.

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I want to thank the Titan team for all their efforts during due diligence to get the Carl Star transaction over the goal line.

All of that hard work is making our flywheel turn and is showing in our financial performance and our ability to seek growth.

In closing I would like to welcome the car star team to tighten organization.

It's clear they are really good group of people they've done an excellent job building Carl start into the strong business that I talked about earlier, they are world class and serving its customers and its end markets tight.

Paul George Reitz: They've done an excellent job building Carl Starr into the strong business that I talked about earlier. They're world-class in serving their customers and their end markets. Titan and Carl Starr are better together.

<unk> tightened and Carl Star are better together.

David A. Martin: With that, I'd like to turn the call over to David. Thank you, Paul, and good morning to everybody on the call. As Paul noted, the acquisition of Carl Starr is a transformative deal. So it is very important to say because of all the things that it brings to Titan, and more importantly, the people that come with it.

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

Thank you Paul and good morning to everybody on the call.

As Paul noted the acquisition of Carl Star is a transformative deal as we said so it is.

Very important to say because of that.

All of the things that it brings to Titan.

And more importantly, the people that come to Titan. So we're very happy to have them as part of the tightened family.

David A. Martin: So we're very happy to have them as part of the Titan. Our operations and our financial results going forward will look different than they have up to date. Again, Paul said it, the acquisition multiple was four times. We expect the deal to be immediately accretive.

Our operations in our financial results going forward will look different than they have up to now.

Again, Paul said it.

Acquisition multiple was four times and we expect the deal to be immediately accretive which is certainly something we're excited about.

David A. Martin: It's certainly something we're excited about. Before I get into more details on that, I will touch on some summary highlights from our fourth quarter and fiscal year 2023 results. A primary thing to emphasize is that these results provide solid evidence that the work we've done to optimize our operations is driving a better, durable gross margin profile that positions us well to capture improved profitability over the long term. Full year revenues came in at $1.8 billion for 2023, as compared to 2022, which was over $2 billion. Our adjusted EBITDA was $205,000. For the fourth quarter, our revenues were $390 million, with adjusted EBITDA of $38 million.

Before I get into more details on that I will touch on some summary highlights from our fourth quarter and fiscal year 2023 results.

Primary thing to emphasize is that these results provide solid evidence that the work we've done to optimize our operations is driving a better durable gross margin profile.

That positions us well to capture the improved profitability over the long term.

Full year revenues came in at $1 8 billion for 2023 as compared to 2022.

Over $2 billion.

And our adjusted EBITDA was $205 million for the fourth quarter, our revenues were $390 million with adjusted EBITDA of $38 million.

David A. Martin: Our full-year gross margins improved 20 basis points, from 16.6% to 16.8% in 2023, despite the sales being driven down year over year through de-stocking and the other economic factors that have impacted our sales this last year. Elaborating on that dynamic a bit further, as one might expect, our margins have typically followed the agricultural cycle, and our goal has always been to aggressively manage our input costs to the extent we can, while bala As a manufacturer, we are naturally impacted by raw material costs for our wheels and tires. With that in mind, over the last several years, we have worked really hard to improve our production and our operations. By controlling the things we can control, we have been able to make durable gains in our cost structure, and the result is a higher gross margin floor, as our 2023 results show. SG&A expense for the fourth quarter was $32 million, compared to $38.5 million in the prior year, a change due primarily to inflation pressure, especially in employee comp.

Our full year gross margins improved 20 basis points from 16, 6% to 16, 8% in 2023, despite the sales being driven down year over year through.

Through the Destocking and the other economic factors that have impacted our sales this last year.

Elaborating on elaborating on that dynamic a bit further as one might expect our margins have typically followed the AG cycle and our goal has always been to aggressively manage our input costs to the extent, we can while balancing our product pricing in a way that allows us to earn a fair return on our assets.

As a manufacturer we are naturally impacted by raw material costs for our wheels and tires.

With that in mind over the last several years, we have worked really hard to improve our production in our operations by controlling the things. We can control we have been able to make durable gains in our cost structure and the result is a higher gross margin floor as our 2023 results show.

SG&A expense for the fourth quarter was $32 million compared to $30 5 million in the prior year.

With the chain.

Due primarily due to inflation pressures.

And especially in the employee compensation for the full year. These expenses totaled $135 million up a modest one 6% from.

David A. Martin: For the full year, these expenses totaled $135 million, up a modest 1.6% from $133 million in 2012. That is important given the world that we're living in with inflation and things like that, and we're able to really control our costs. R&D expenses were $3.1 million in the fourth quarter and $12.5 million for the full year.

$133 million in 2022 that is important given the world.

We're living in with inflation and things like that and we're able to really control our costs.

R&D expense was $3 1 million from the fourth quarter and $12 5 million for the full year those figures compared to $2 8 million and $10 4 million in 2022, and they reflect our continued emphasis on prioritizing our R&D investments we are committing to maintain our best in class portfolio of products.

David A. Martin: Those figures compared to $2.8 million and $10.4 million in 2022, and they reflect our continued emphasis on prioritizing our R&D and development. We are committing to maintain a best-in-class portfolio of products, and with farmers increasingly making their decisions based on equipment ROI, our innovations are a significant differentiator for us. Our operating income was $20.7 million for the quarter and $149 million for the full year.

And with farmers increasingly making their decisions based on equipment ROI. Our innovations are a significant differentiator for us.

Our operating income was $20 7 million for the quarter and $149 million for the full year.

David A. Martin: Our operating cash flow for the year was $179 million, up 11.6% from the prior year. We were very pleased to be able to improve our operating cash flow given the top line headwinds that we experienced throughout. This shows the discipline by our global operating and finance team to make significant efforts to focus on working capital and all the things that go into driving cash. During the year, we had a couple non-operating events impact the income statement that I'd like to mention. For example, there was an unusually high devaluation of the Argentinian peso relative to the U.S. dollar. As a result, we applied hyperinflation accounting rules to Argentina and Turkey, which had both been designated as hyperinflationary economies in prior years.

Our operating cash flow for the year was $179 million up 11, 6%.

Yeah.

The prior year.

We were very pleased to be able to improve our operating cash flow that.

Given the top line the top line headwinds that we experienced throughout the year.

This shows the discipline by our global operating and finance teams and significant efforts too.

Focus on working capital and all the things that go into driving cash flow.

During the year, we had a couple of non operating events impacting income statement that I would like to mention.

There was an unusually high devaluation of the Argentinian peso relative to the U S. Dollar as a result, we applied hyperinflation accounting rules to Argentina, and Turkey, which are.

Had both been designated as hyper inflationary economies in prior years, we did recognize $21 million in foreign exchange losses for the year.

David A. Martin: We did recognize $2.1 million in foreign exchange losses for the year. Also, we approved a restructuring plan at one of our European businesses to adjust our cost structure and better position the business to outperform in the future. The cost of the restructuring action was $1.7 million.

We also also we approved a restructuring plan at one of our European businesses to adjust our cost structure and better position the business to outperform in the future the cost of the restructuring action was $1 6 million.

David A. Martin: Both the foreign exchange loss and the restructuring costs were adjusted out of EBITDA, Net Income, and EPS within the non-GAAP reconciliation schedule. Our strong cash flow enabled us to make a variety of key investments in the business during 2023, and our CapEx totaled $61 million, compared to $47 million during the prior year. We also used our cash to fund our share repurchase program, buying back 1 million shares for a total of $13.5 million during the fourth quarter, bringing the total for the year to $1.5 million, to nearly 2.7 million shares worth nearly $33 million. That leaves us approximately 17 million of available capacity on our program. Over the last several quarters, we've also called out our strong free cash flow and intentions to be judicious in deploying it. Echoing Paul's comments, we're excited to have announced the acquisition of Carl Starr this morning. The cost of the acquisition was $296 million, which was composed of $127 million of cash and $169 million of TWI stock, in the form of $11.9 million of newly issued shares.

Both the foreign exchange loss and the restructuring costs were adjusted out of EBITDA and net income and EPS within the non-GAAP reconciliation schedule.

Our strong cash flow enabled us to make a variety of key investments in the business during 2023, and our Capex totaled 61 million for the year compared to 47 million.

During the prior year, we also used our cash to fund our share repurchase program buying back 1 million shares for a total of $13 5 million during the fourth quarter.

Bringing the total for the year.

To nearly $2 7 million shares worth near nearly $33 million that leaves us approximately $17 million of available capacity on our program.

Over the last several quarters, we've also called out our strong free cash flow and intentions to be judicious in deploying it.

<unk> pulse comments, we're excited to have announced the acquisition of Carl Star. This morning.

The cost of the acquisition was $296 million, which was composed of a $127 million of cash and $169 million is TWD <unk> stock in the form of 11 nine.

Of newly issued shares.

David A. Martin: Importantly, leveraged post-transaction stands at a very manageable 1.3. I'm sorry; I lost my way on my own script here. 1.3 times net debt to adjusted EBITDA on a pro forma basis. Altogether, we expect our cash flow to adequately fund continued debt reduction along with our shaver purchase program and our capital program. Concurrently with the closing, we expanded our ABL from $125 million to $225 million. Terms of the expanded ABL are very similar to the existing facility.

Importantly leverage post transaction stands at a very manageable one three.

Okay.

I'm sorry.

Last month <unk>.

On the script here one three.

Times net debt to adjusted EBITDA on a pro forma basis altogether, we expect our cash flow to adequately fund continued debt reduction along with our share repurchase program and our capital programs.

Concurrently with the closing we expanded our ABL from 125 million to $225 million in terms of the expanded ABL are very similar to the existing facility.

David A. Martin: We have expanded the guarantors and the related borrowing base to include the domestic and Canadian assets of Carlson. The pricing on the facility is also similar, at the SOFR plus 138 basis points to 185 basis points, depending on our fixed charge coverage ratios from time to time.

We've expanded the guarantors and the related borrowing base to include the domestic and Canadian assets of Carl Star.

The pricing on the facility is also similar.

At the Sofa, plus 138 basis points to 185 basis points, depending on our fixed charge coverage ratios from time to time the facility will extend to 2000.

I can't even read my paper anymore. The facility will extend through 2028 maturing concurrently with our senior notes.

David A. Martin: The facility will extend to 2028, maturing concurrently with our senior notes. In terms of margins, Carl Sturz's results over the last few years have been relatively consistent with Titan. And, as we noted in the press release, we expect there will be areas where meaningful operating cost synergies can be pursued. It's a bit premature to give specific figures, and we anticipate sharing more detailed information as we work through the integration of the two businesses in the coming days. Broadly, with an operating profile similar to Titan, Carl Starr is a solid generator of cash, and we expect the combined businesses to produce adequate cash flow to allow us to continue to fund our share repurchase program while also working down the increase in our ABL borrowing we have taken on today and investing in the future of the combined companies. Lastly, as we noted in our earnings release, we're not providing fiscal year 2024 guidance at this time.

In terms of.

Margins Karl stars results.

The last few years have been relatively consistent with tightens.

And as we noted in the press release, we expect there will be areas, where meaningful meaningful operating cost synergies can be pursued.

It's a bit premature to give specific figures and we anticipate sharing more detailed information as we work through the integration of the two businesses in the coming months.

Broadly with an operating profile similar to Titan Carl Star is a solid generator of cash and we expect the combined businesses to produce adequate cash flow to allow us to continue to fund our share repurchase program. While also working down the increase in our ABL borrowing we have taken on today and investing in the future of the <unk>.

<unk> companies.

Lastly, as we noted in our earnings release, we're not providing fiscal year 2020 for guidance at this time.

David A. Martin: The addition of Carl Starr is a significant, transformative acquisition, and with that, we think it's prudent to get down the integration path a little ways, and as we do that, we expect to gain more clarity on what 2024 will look like for our combined operations. As we do so, we will look to provide guidance for the year during our subsequent earnings report. And thank you for your time this morning and your attention to what matters to Titan. It is a very exciting day for our company. I'd like now to turn the call back over to Jaquita, our operator, for the Q&A session. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

The addition of <unk> as a significant transformative acquisition and with that we think it's prudent to get down the integration path a little ways and as we do that we expect to gain more clarity on what 2024 will look like for our combined operations as we do so we will look to provide guidance for the year during or subsequent earn.

<unk> reports.

And thank you for your time this morning, and your attention to what matters to tighten it is a very exciting day for our team.

Wed like to.

I'd like now to turn the call back over to Quita, our operator for the Q&A session.

Absolutely.

We would now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Lawrence Tighe De Maria: To withdraw your question, please press star then two. The first question comes from the line of Larry DeMaria, William Blair. Your line is now open. Thanks. Good morning.

Your first question comes from the line of Larry de Maria with William Blair. Your line is now open.

Hi, Thanks, good morning.

Paul George Reitz: And congratulations on the deal. Can you, I guess there's no, obviously you just said there's no guidance on 24. Can you give some color on, you know, you said Carl Starr reduces cyclicality. What does Carl Starr look like in 24?

Hey, congrats on the deal.

Can you I guess.

Obviously, you just said there is no guidance in 2004 can you give some color on you said Carl start reducing cyclicality, what is where I'll start look like in 'twenty four from where you stand now.

Paul George Reitz: I think David mentioned in his comments that Carl Starr is... similar to what we're seeing in Titan. And really, overall, what you're seeing across the complete landscape, so consumer, agriculture, construction, there is some softness in the market compared to 23. I think their business, though, is softer for different reasons than what we've seen. They are exposed to interest rates being more consumer-based.

I think David had mentioned in his comments Carl Star is similar to what we're seeing and tightened.

And really overall, what youre seeing across the complete landscape so consumer AG construction.

There is some softness in the market compared to 23.

I think their business, though is softer for different reasons than what we've seen.

They are exposed to interest rates being more consumer base, but.

Paul George Reitz: We've talked about it in some of our segments with smaller tractors in the agriculture space. Interest rates have had an impact, So, you know, overall, I don't think there's anything different with Carlstar that's different than Titan, that's different than what you heard from any other release that's been put out there with ag or construction. It's a number of different factors, from interest rates to farmer income to... geopolitics, government, blah, blah, blah.

We've talked about in some of our segments with smaller tractors in the agriculture space interest rates that had an impact so.

Overall, I don't think Theres anything different with Carl started that's different than tightened thats different than what you've heard from any other relief that's been put out there with with AG or construction. It's a number of different factors from interest rates to farmer income to <unk>.

Politics government Blah Blah Blah, you could go on and on so overall.

Paul George Reitz: You could go on and on. So, but you know, overall, the 23 results for Carl Starr were exceptional. And, you know, they're gonna have another good year in 24. They had a good year in 22.

The 23 results for Karl Star were exceptional.

And they're going to have another good year in 'twenty four or they had a good year in 'twenty. Two so it's a high quality business, it's been performing well, it's going to continue to perform well as we've mentioned a number of times it's big.

Paul George Reitz: So it's a high quality business. It's been performing well, and it's going to continue to perform well.

Paul George Reitz: As we've mentioned a number of times, it's a tremendous one-stop shop, an exceptional team, put on the table, and David mentioned synergies, but we really did spend a lot of time on it because our teams are going to have to work together to really drive down into these, but just growth opportunities. You take Carl Starr's capabilities to service the market, and combine that with Titan's existing product portfolio in markets where, quite frankly, Carl Starr isn't touching right now. As we mentioned, Carl Starr's primarily in the U.S., and a little bit in Europe.

They've got a tremendous one stop shop and exceptional team and I think the one thing we should also.

Put on the table and David mentioned synergies, but we really did spend a lot of time on it because our teams we have to work together to to really drive down into this but just growth opportunities.

You take Karl stars capabilities to service the market combine that with tightened as existing product portfolio and markets, where quite frankly, Carl star isn't touching right now as we mentioned Carl stores, primarily in the U S. A little bit in Europe, you look at our global manufacturing footprint, what tightens missing is there.

Paul George Reitz: When you look at our global manufacturing footprint, what Titan's missing is that one-stop-shop model, that secret sauce of connecting to customers through distribution centers in a world-class SIOP process. So we're excited to get in there starting today and learn from the people there and see how we can not only work together here in the markets that we have in front of us, but also in places where opportunities exist for Titan and Carl Starr to work better together in the future. Yeah, thanks.

That one stop shop model that secret sauce of connecting to the customers through distribution centers and in a world class SIOP process. So we're excited to get in there starting today and learn from the people there and see how we can not only worked together here in the markets that we have in front of us, but also in places where opportunities exist.

For tightened Carl start moving moving better together in the future.

Paul George Reitz: And I was going to ask you about the synergies and the manufacturing facilities and the ability to leverage them. I guess, I guess the first question is, does that go both ways? You know, is that can you actually get into their facilities and bring some of your product through, and vice versa, maybe down in South America? And secondly, I don't know if you can confirm or not, but it seems like this happened rather quickly.

Yes, Thanks, and I was going to ask you about the synergies and the manufacturing facilities and ability to leverage them. I guess first question is does that go both ways.

Okay.

Can you.

Actually get into their facilities, and bringing new product through and vice versa, maybe down to South America.

And secondly, I don't know Robert.

It seems like that's happened rather quickly really.

Paul George Reitz: Have we really explored the cost and sales synergies, or is it just, it sounds like it came together quickly, and we're gonna figure that out as we go? Yeah, it's a good question on the manufacturing footprint. I mean, there are opportunities there, you know, like you said in your question to leverage their plants more effectively to leverage ours more effectively. We did get a chance to walk around their facilities.

Florida.

And sales synergies.

It sounds like it came together quickly and we can figure that out as we go.

Yes.

It's a good question on the manufacturing footprint I mean, there are opportunities there.

You said in your question to leverage their plants more effectively to leverage ours more effectively.

Did get a chance to walk around their facilities. So it did happened fairly quickly the transaction, we announced today, but I also want to say.

Paul George Reitz: So it did happen fairly quickly, the transaction we announced today. But I also want to, I would say that we did a lot of due diligence over the last couple of months. We've been around their plants.

We did a lot of due diligence over the last couple of months, we've been around their plants, the legal and financial teams that work endlessly getting comfortable with the business. So I would say, it's now going forward is learning more about their people and their processes their strengths.

Paul George Reitz: The legal and financial teams have worked tirelessly, getting comfortable with the business. So I would say the key now is learning more about their people and their processes, their strengths, and combining that with our strengths. But, like you said in your first question, Larry, we do need to spend some time getting around to their manufacturing locations and giving them a chance to see ours, too. Let those dots connect, and the light bulbs start coming on, and see what their teams start thinking when they see our capabilities and when our team sees theirs.

Combining that with our strengths, but then like you said in your first question, Larry we do need to spend some time getting around to their manufacturing locations and give them a chance to see ours to.

Let those dots connect and the light bulbs turned on and see what their teams starts thinking when they see our capabilities when our team sees their capabilities and so I think it's an exciting time.

Paul George Reitz: And so I think it's an exciting time. But yeah, to your point, this all came together quickly. We're pleased to announce it today. We think the timing is right. Let's get going.

But yes.

To your point.

This all came together quickly we're pleased to announce that today, we think the timing is right, let's get going.

Paul George Reitz: But we certainly have some opportunities out there that we're going to continue to explore, and it will take us a little bit of time to kind of articulate it more clearly back to the investor. Thanks. Let's ask a quick question. Any customer overlap to speak of?

We certainly have some opportunities out there that we're going to continue to explore.

A little bit of time to kind of articulate it more clearly back to the investor base.

Thanks, and just last quick question any customer overlap with Topeka.

Paul George Reitz: Mainly, our businesses are very complementary. And I think to answer the customer question, you have to look at the product. So because of the difference in the product, the overlap is insignificant to start with, but then where we do overlap with the same customers, the products are different. There are some customers in smaller ag, To be honest with you, we really don't overlap. We kind of go in different directions here and there.

Yes.

Mainly our businesses are very complementary.

I think to answer the customer question you have to look at the products. So because of the differential in the products. The overlap is insignificant to start with but then where we do overlap with the same customers. The products are different there are there are some customers in smaller AG.

To be honest with you, we really don't overlap we kind of go different directions here and there I think we both know each other's business well enough that.

Paul George Reitz: I think we both know each other's business well enough that even where we do have similar products, the overlap at that particular customer is fairly well contained. And so, you know, to answer your question, these businesses are highly complementary with a little bit of overlap. Starting at 7:30 this morning, our teams were getting on the phone with customers and making that first call to any of those overlapped customers together. So what we want to do is say to our customers, you know, we're in this together; you've got a stronger combined company. But at the same time, we're still going to continue to serve you in the same effective manners and processes that Titan built and Carl Starr built and not try to change that. So I think the customer base should see this favorably. And again, to answer your question, there is very little overlap when you combine both products and customers. Again, there is some overlap in each, but when you look at them from a matrix standpoint, there is very little overlap in both.

Even where we do have similar products that overlap at that particular customer is fairly well contained and so.

To answer your question. These businesses are highly complementary with.

A little bit of overlap.

<unk> at $7 30. This morning, our teams, we're getting on the phone with customers and making the that first call to any of those overlap customers together. So what we want to do say to our customers. We are in this together you got a combined stronger company.

But at the same time, we're still going to continue to service you.

And the same effective manners and prices that tightened built in karlstad built and not try to change that so I think the customer base should see this in a favorable manner and again as to answer your question.

Very little overlap when you combine both products and customers.

Some overlap in each but when you look at it from a matrix standpoint, very little overlap in both.

Lawrence Tighe De Maria: Okay, I'll jump back in. Thanks and good luck. All right. Thanks, Lurk.

Okay I'll jump back in thanks, and good luck.

Alright, Thanks Luke.

Operator: Thank you. The next question comes from the line of Steve Ferazani with Sidoti. Your line is now open.

Thank you.

The next question comes from the line of Steve <unk>.

Arizona with Sidoti Your line is now open.

Stephen Michael Ferazani: Obviously, you've been very busy. You had a lot to cover on the call this morning. A couple more questions on CallStar. You know, your advantage has always been that you're operating in relatively niche markets with less competition. Can you compare the competitive landscape for CallStar? It looks like a fairly similar margin profile.

Good morning, Paul Good morning, David obviously, you've been very busy yet a lot to cover on the call. This morning.

A couple more questions on Costa.

Your advantage has always been you're operating in a relatively niche markets.

Less competition can you compare the competitive lamps landscape for Comstock it looks like a fairly similar margin profile.

Paul George Reitz: Yeah, it's a good question, Steve. And that's something that the early due diligence, the biggest hurdle we had to get over, is probably related to your question right there. We needed to be comfortable that their margin profile and the competitive landscape and how they operate in their markets were similar to ours. I mean, we as Titan have built our business around being very connected to customers with an extensive product portfolio that can mitigate risk for our customers in a way that no competitor can. Carl Starr has that exact same model in the three primary segments they serve.

Yeah. It's a good question, Steve and Thats something that the early due diligence the biggest hurdle we had to get over is probably related to your question right there.

We needed to be comfortable that their margin profile and the competitive landscape and how they operate in markets with similar to ours.

As tightened built our business around being very connected to the customers with an extensive product portfolio that can risk mitigate our customers in a way that no competitor can.

Carl Star has that exact same model into three primary segments. They serve.

Paul George Reitz: They have a product portfolio that's exceptional. They're very connected to their customers. And their margin profile is good.

They have a product portfolio that is exceptional they are very connected to their customer their margin profile is good they understand pricing in the marketplace extremely well as I've mentioned, a number of times that secret sauce, they have with their the.

Paul George Reitz: They understand pricing in the marketplace extremely well. As I've mentioned a number of times, that secret sauce they have with the process that connects their forecast, to their inventory, to their distribution centers, to their manufacturing. Their customers rely on Carl Starr in a significant way. So they have a profile that's very similar to Titan. Truthfully, in the segments they operate in, there's no competitor that can do it across all three spectrums like they can. So if you look at Titan, what we do with wheels and tires, and ag, there's nobody that can do wheels and tires like we do.

The process that connects their forecast.

Their inventory to their distribution centers to their manufacturing.

Their customers rely on Karl start in a significant way so.

Yes, they have a profile that's very similar to Titans truthfully in the segments they operate.

There is no competitor that can do it across all three spectrums like they can so if you look at tightened what we do with wheels and tires and AG, there's nobody that can do wheels and tires like we do and if you look at the three primary segments for Karl starts very similar that there is not a competitor that can do what they do with this one stop shop across.

Paul George Reitz: And if you look at the three primary segments for Carl Starr, it's very similar that there is not a competitor that can do what they do with this one-stop shop across all three segments. So there are a lot of similarities that are complementary. Again, Titan and Carl Starr are better together.

All three segments. So a lot of similarities that are complementary to get tightened Carl star are better together.

Great.

It's helpful. I mean, I have to ask Paul and it's really a question for them more that would be for you but.

Paul George Reitz: Great. I have to ask this, Paul, and it's really a question for them more than it would be for you, but given the, you know, how you've described this business, why would you sell it for four times what you're asking? Let me try to get a response from them, and we'll get back to you on that one. I think, look, from a Titan's perspective. Look, I will give you some color on that.

Given the high <unk>.

You've described this business why would you sell it for four times EBITDA.

Yeah.

I don't know if I can't even answer that.

I'm just trying to get a response from them and we'll get back to you on that one I think look for Med Tech Titans.

Look.

I will give you some color on it and again I don't want to speak on behalf of them.

Right.

It's a great opportunity for Titans shareholders employees and customers along with Carl Star their employees their customers and I think Carl Star Investor Group, It's a tremendous private equity business. They have a long standing reputation.

Paul George Reitz: Again, I don't want to speak on behalf of them. Right. It's a great opportunity for Titan's shareholders, employees, and customers, along with Carl Starr, their employees, their customers, and I think the Carl Starr investor group saw value in becoming a shareholder of Titan. They believed in the company, they believed in Titan, they believed in Carlstar, but they also believed in the power of the two companies together.

They saw value in becoming a shareholder of Titan. They believed in the they believed in Titan. They believe me Carl Star, but they also believed in the power of the two companies together. So if you look at the deal structure and I'll, let David comment more about that.

David A. Martin: So if you look at the deal structure, and I'll let David comment more about that, you know, by using cash and stock, we looked at this as a great opportunity and a win-win for both Titan and Carl Starr's investors, customers, and employees. And so I think on behalf of the owners of Carl Starr, which again are tremendous people, they will be having a board seat at Titan. They just believe in the power of the two companies combined.

By using cash and stock.

We looked at this as a great opportunity in a win win for both tightened and Carl stars investors customers employees, and so I think on behalf of the.

The owners of Karl Star, which again are tremendous people they will be having a board seat on our on our comp at Titan. They just believed in the power of the two companies combined.

David A. Martin: Yeah, there's not much more to say than that. I mean, it's a fair allocation of that, and obviously, they believed in the upside of the combination and took a significant amount of stock as part of that. So, you look at it that way. It'll prove out to be of great value to them.

There is not much more to say than other than that I mean, it's a fair allocation of that and obviously.

I believed in the upside of the combination and.

Took a significant amount of stock as part of this this deal. So if you look at it that way.

I think.

It will prove out to be.

A lot of value to them as well.

Stephen Michael Ferazani: Thanks for that. Just because we do have to model it, can you, can you, do you have any idea of the seasonality of that business compared to yours and then the geographic distribution? Yeah, I'll take both of those questions, Steve. It's interesting, they tend to have an early part of the year, similar to ours, in terms of, you know, spring, planting, and then also... Power Sports Seasons and things like that, so they have a little bit bigger first half and second half, but I wouldn't say it's that significant.

Alright.

That's helpful. Thanks for that.

Just because we do have to model it.

Can you do you have any idea of the seasonality of that business compared to yours, and then geographic distribution.

Yes, I'll take both of those questions Steve.

It's interesting.

<unk> tend to have an early part of the year similar to ours in terms of.

Spring planting and then also.

Power sports seasons, and things like that so they have a little bit bigger bigger first half and second half, but I wouldn't say, it's that significant though.

David A. Martin: It's not really that... So, you know, you can look at quarter-to-quarter as being fairly similar, but just a little bit more in the first half than the second. Geographic dispersion is mostly North American.

It's not really that.

<unk>.

Different. So you can you can look at quarter to quarter, it being fairly fairly similar with just a little bit more in the first half in the second half.

Geographic dispersion is mostly North America.

Stephen Michael Ferazani: Thank you. I said he was here a little bit in Europe, a little bit near. You obviously ended the year, given the really strong free cash flow, with a very significant cash balance. You're expanding the ABL, but it seems like, and I know we're getting into a softer year, you could pay down that pretty quickly. And you haven't been paying it down that lately.

They are a little bit to get one more in okay great.

Sorry, I missed it.

Okay.

A little bit.

Sure.

Okay.

You. Obviously you ended the year given the really strong free cash flow with a very significant cash balance.

You're expanding the ABL, but it seems like and I know, we're getting into a softer year. It seems like you could pay down pretty quickly and you haven't been paying down debt lately, you've built that up how are you thinking about that.

David A. Martin: You've built that up. How are you thinking about that? I think over time we'll be able to generate enough cash in the U.S. to pay down the debt.

I think over time, we will be able to Jenny.

Generally the cash in the U S to pay down the debt.

Stephen Michael Ferazani: We haven't fully mapped it out in terms of how quickly that will happen. There was some working capital, and adjustments at the closing that we paid for that will come back to us, and we'll be able to pay down debt and call it the first half for that, and over the second half, we'll be judicious in how we do that, and also maintain our capabilities to invest in the business and continue our share repurchase program where it falls. Thanks, Paul. Thanks, David. Thank you. The next question comes from the line of Tom Kerr with Zacks Investment. Your line is now open.

We haven't fully mapped it out in terms of how quickly that will happen there was some working capital.

Adjustments at the closing that we had we paid for that will come back to us and we'll be able to pay down debt and call. It the first half for that and over the second half will be judicious in how we do that and also maintaining our capabilities to invest in the business.

<unk>.

Continue our share repurchase program where appropriate.

Great. Thanks.

Thanks, Paul Thanks, David.

Thank you Steve.

Thank you.

The next question comes from the line of.

Okay.

Zach.

Your line is now open.

Thomas Kerr: Good morning, guys. I was going to comment, I was going to comment, you guys should start an investment business, buying something at four times EBITDA. I think Carl Starr has been covered, but is it a less capital-intensive business than the legacy business, just because of the size of the products?

Good morning, guys.

Hey, good morning, So I was going to comment.

Can I comment I guess, just starting investment business buying something at four times EBITDA.

The I think the apparel.

It has been covered but.

With a less capital intensive business in the legacy business, just because of the size.

The products and then secondly on that.

Paul George Reitz: And then secondly, on that, you talked about similar margin profiles; is the gross margin similar in the 15% range? Yeah, I'll cover both of those, Tom. The first one, well, I'll actually take the second one first.

You're talking about similar margin profiles, because the gross margins similar to the 15% range.

Yes, I'll cover both of those Tom.

The first one well actually take the second one first on the margin profile, it's slightly accretive to Titans margins.

David A. Martin: The, on the margin profile, it's slightly accretive to Titan's margins. But they do maintain operating costs, you know, those distribution centers which tend to be more operating costs, a little bit higher there, so you end up having a deep and down margin that's very similar. I think ours has been averaging about 10%, so it's about the same. So, that's it. That pretty much covers the profile of that. Your first question, I'd say I think it's the least capital intensive business, just because of the size of it.

Do maintain operating.

Distribution centers would tend to be more operating cost.

A little bit higher there so you end up having a.

David the EBITDA margin that is very similar.

Think ours has been averaging about 10%. So that's about the same.

So that.

<unk>.

That pretty much covers the profile of that.

Your first question I can't remember it now.

The less capital intensive business.

Yes.

David A. Martin: Yeah, the size of the business, obviously, with the products that they produce is smaller. They've been maintaining around 2% of sales, which is not dissimilar to Titan. We've been a little bit higher than that.

Yes, the size of the business, obviously with the products that they produce.

Moller.

<unk> been maintaining around 2% of sales which is <unk>.

Dissimilar to tighten we've been a little bit higher than that but about 2% of sales.

David A. Martin: Okay, all right. And I know you guys aren't going to give guidance, but I'm going to try anyway, so we can... Going forward or year to date, with the inventory problem solved, we wouldn't expect these massive 20 to 30 percent declines. That's number one, if I could pick around that. And then, number two, even with the softness we're seeing with farmer income, can we still maintain the gross margins in that 15% range, do you think this year? Yes, on the margin profile, we were over 16% in fiscal year 2023 on our gross margins, and we expect to be able to be in a similar ballpark going forward as well.

Okay Alright.

I know you guys aren't going to give guidance, but I'm going to try.

Anyway so.

Going forward, our year to date with the inventory problem.

We wouldn't expect massive 20% 30% declines.

That's number one if I can pick around that.

Number two even with the softness we're seeing with farmer income.

Can we still maintain the gross margins in that 15% range do you think this year.

Yes on the margin profile.

We were over 16% in fiscal year 2023 on our gross margins and we.

We expect to be able to be in a similar ballpark.

Going forward as well given all the things we've talked about how we operate the discipline that we have in managing our input costs, and so forth and our pricing and so everything should be pretty intact with that.

David A. Martin: Given all the things we talked about, how we operate, the discipline that we have in managing our input costs and so forth, and our pricing, and so everything should be pretty intact. Now, again, on the pressure side, you know, Paul can address the overall market context. We believe we're in a position where, you know, any softness that we're seeing at a higher level is offset by the fact that we were impacted pretty significantly in 2020. Yeah, so I think you referenced Tom, 20 to 30% down right now. We're not in a situation like that at all. There's general softness in the marketplace, and I think everybody that's talked about it so far this year has made similar comments. We're not gonna sit here and repeat that. I think a lot of what you heard from the large ag companies was 10%-ish, the 10% range.

Now again on the pressure side.

Paul can address the overall market context.

We believe we are in it.

Positioned where.

<unk>.

Any softness that we're seeing at a higher level is offset by the fact that we were impacted pretty significantly in 2023.

Yes, So I think you referenced Tom 20% to 30% down market now we're not in a situation like that at all.

<unk>.

There is general softness in the marketplace and I think everybody that's talked about it. So far this year has said similar comments in so we're not going to sit here and repeated I think a lot of what you heard from the large AG companies lose 10% ish, 10% range and so.

Thomas Kerr: And so, no, we're not seeing anything that's indicating that the sky is falling, run for cover, down 30%. So we're just, we're gonna spend some time getting our arms around the Carlstar forecast and the Titan forecast. And we'll be able to provide some additional color as we move through the year. Sounds good. One more quick kind of accounting question. Can you refresh my memory on how big the business in Argentina is that would have that larger currency effect?

No, we're not seeing anything thats, indicating the sky is falling run for cover.

130%. So we're just we're going to spend some time getting our arms around the karlstad forecast in a tightened forecast and we will be able to provide some additional color as we move through the year.

Sounds good and one more quick kind of accounting question can you refresh my memory on how big is the business in Argentina that would have that larger currency effects and maybe just quickly explain the hyperinflation route.

David A. Martin: And maybe just quickly explain the hyperinflation rule. Okay. We can take it offline later, too, Tom, but it's a smaller business, but a very profitable business for us, and it's really the Nat Asset position that creates that, and FX losses over time. You've got to remember... The devaluation of the Argentinian peso, various. 2023.

Okay.

We can take it offline later too Tom.

It's a smaller business, but a very profitable business for us and it's really the net asset asset position that creates that.

FX losses over time, you got to remember.

The devaluation of the.

Argentinian peso was.

Very significant during the 2023. So it was you have assets that.

David A. Martin: So it was a, you have assets that are significantly devalued during that period of time. And it's over the course of a longer period of time as well. We were catching up to hyperinflationary rules, so basically you have to adjust everything to the current rate versus the historical rates for a lot of years.

Significantly devalued during that period of time and it's over the course of a longer longer period of time as well. So we were catching up to a hyperinflationary rules. So basically you have to adjust everything too.

At the current rate.

Versus the historical rates for a lot of your assets Tom It was stupid.

Paul George Reitz: Tom, it was stupid. Argentina is a great agricultural market. We make good margins. We got a facility there, and good connections to the customers. We don't manufacture in Argentina.

Or just see it as a great agriculture market. We made good margins, we got a facility there good connection to the customers. We don't manufacturer in Argentina like David said is just catching up on years of.

Paul George Reitz: It's like David said. It's just catching up on years of activity, but it makes it seem like it's a terrible business that something tragic happened. No, Argentina is a good market.

Kind of activity, but it makes it seem like it's a terrible business that something tragic happened.

Argentina is a good market, it's been part of our Brazilian portfolio.

Paul George Reitz: It's been part of our Brazilian portfolio, our output portfolio for a long time. Nothing really changed from a business perspective. It's just... I don't know. David probably doesn't like me calling it stupid, but it was stupid.

<unk> portfolio for a long time, nothing really changed from a business perspective, it's just I don't know.

David probably isn't going to be call it stupid, but it was stupid.

Counting rules require us to do this in.

David A. Martin: Yeah. Well, the country rules require us to do this, and so we obviously call things up with respect to that. And you have to, when it hits over... the deflation or inflation over a period of time if it exceeds 100%, and you have to go to these rules.

So, we obviously call things up with respect to that and you have to.

When it hits over.

The deflation or the inflation over a period of time, if it exceeds 100%.

And you have to go to these rules. So we can talk a lot more about it offline if you want.

David A. Martin: So we can talk a lot more about it offline if you want. Yeah, that's kind of what I thought, but all right, I'll jump back in the queue. Thanks. All right. Thanks, Alan. Thank you. The next question comes from the line of Kirk Ludtke with Imperial Capital. Your line is now open.

Yes, that's kind of what I thought all right I'll jump back in the queue.

Alright, Thanks Donna.

Thank you.

The next question comes from the line of Kurt Ludtke with Imperial Capital. Your line is now open.

Kirk Ludtke: Hello, Paul, David, Alan, can you hear me? Yeah, yeah. Good morning. Good morning.

Hello, Paul David Alan can you hear me.

Yes, good morning, good morning.

Paul George Reitz: Great. Hey, congratulations on the transaction. A couple follow-ups. One, how would you compare Carl Starr to what you're already doing in your consumer segment? Not comparable at all. Carl Starr is a world-class thoroughbred, and we're a You know, what we do in consumer just doesn't even touch what they do. You know, what we're doing in consumer, and I know David's mentioned this quite a few times, is going in a different direction than Carlstar, where we were. We have a really good mixing facility in Tennessee, and so we were doing some custom mixing for other companies, But in the true consumer space, where Carlstar operates, in the segments that they are in, Yeah, I mean, we dabbled around, but yeah, they were running laps around us. So again, Titan and Carl Star are definitely better together. Got it. Were you competing with Carl Starr? Is that how you... learned about them and got to know them?

Okay great.

Congratulations on the transaction.

Couple of follow ups one how.

How would you compare <unk>.

I'll start with what you're already doing and your consumer segment.

Not comparable at all Karl Star is a world class Thoroughbred.

We're.

What we do in consumer just doesn't even touch what they do what we're doing in consumer and I know David mentioned, there's quite a few times is going a different direction then Carl Star, where we were we have a really good mixing facility in Tennessee, and so we're doing some some custom mix for other companies along with <unk>.

<unk> our own facilities.

But in the true consumer space, where <unk> operates in the segments that they're in.

Yes, I mean, we dabbled around but yes, they were running laps around us.

So again tightened and Carl Star definitely better together.

Got it.

Or would you can where you.

Competing with Carl Star is that how you.

Learned about them now.

One of them.

Paul George Reitz: You were. Well, we, yeah, I mean, it's a similar world. Competing is probably a little bit of a strong word. I mean, we did touch each other a little bit in some activities, but we really weren't competitors.

Well, we yes it is.

Similar world competing is probably a little bit of a strong word I mean, we did we did touch each other a little bit and some AG.

But we really werent competitors, but it's just a small world where were complementary operating in.

Paul George Reitz: But it's just a small world where we complementary operate in similar spaces and do it in a different way, or with different products, but in a similar way. So a lot of respect for Carl Starr, the way they were connected to the marketplace, to the customers, taking care of the end users, and it's a lot of what Titan did. Really, the complementary nature of our businesses is very strong. And so, I would say we know each other because it's a small world, but not directly competing. Like, the big trade shows we would go to, they wouldn't have a booth. The big trade shows they'd go to, we didn't have a booth.

In similar spaces.

And doing it in a different way.

With different products, but in a similar way so a lot of respect for Karl Star The way they were connected to the marketplace customers taking care of the end users and it's a lot of what tightened did but.

Really the complementary nature of our business is very strong and so I would say we know each other because it's a small world.

But not not directly competing like the big trade shows we would go to they wouldn't have a booth the big trade shows. They go to we didn't have a booth.

Paul George Reitz: So, you know, the overlap is interesting. Okay. And you've been working on the transaction for a couple months. And what precipitated the sale?

So the overlap is minimal.

Interesting, okay, and you've been working on the transaction for a.

A couple of months and what precipitated the sale.

Paul George Reitz: I mean, we've been working on due diligence for about three months. What brought the sale together is just some contacts that, really, between our board members, Carl Starr's ownership group, and myself. We did start talking, well before the last few months. And so there is interest on both parties and seeing this come together. You know, it just takes time, though.

I mean, we've been working on due diligence for.

For about three months I mean, what what brought the sale together is just some contacts that.

Really between our board members Karl <unk> ownership group and myself, we did start talking well before the last few months and so there is interest in both parties and seen this come together.

It just takes time, though it takes time and it takes them understanding of each other of our businesses.

Paul George Reitz: It takes time, and it takes some understanding of each other, of our businesses. And so, yes, I mean, it really came together quickly in the last couple months, and that's a tremendous amount of effort on the Titan team to make that happen, and a few folks from Carl Starr. But if you look at it from a strategic rationale perspective, I don't want to create the impression that this just happened in a few months. There was a lot more behind the scenes that took place.

So yes, I mean, it really came together quickly in the last couple of months.

Tremendous amount of effort on the tightened team to make that happen a few folks from Carl start, but if you look at it from a strategic rationale perspective.

I don't want to create the impression that this just happened in a few months there was a lot more behind the scenes that took place.

Paul George Reitz: We got a great board. I do want to be clear on that. Yeah, I mean, again, we with the strength of our board and the strength of their owners.

Got it and we've got a great. That's helpful. I do want to be clear on that yes, again with the strength of our board and the strength of their owners.

Paul George Reitz: We were able to get some understandings in place that, again, led us to a transaction that you saw today. So, again, I think you get the point. It wasn't just cobbled together in two months.

We were able to get some understanding in place that again, let us lead us to a transaction that you saw today. So again I think you get the point it was it wasn't just cobbled together two months.

Paul George Reitz: Got it. Got it. That's helpful. And it's a decent-sized deal for you. Is this, is this it for M&A for a while? Are you going to focus on this one? Or are there other deals out there you're contemplating?

Got it.

Got it that's helpful and it's a decent sized deal for you is this.

Is this it for M&A for a while or are you going to youre going to focus on this one or are there other deals out there you are contemplating.

Paul George Reitz: Well, I think as a company, we've worked hard to get to this point to pursue growth. We've developed a strong business, a good brand, good products, good people, and have a strong balance sheet. So I think at this point, we need to get our arms around Carl Starr and maximize the value that this brings to the table for our customers and our shareholders. And we do think it's significant. It's accretive right out of the gate, with strong opportunities for growth and synergies. So I think there's going to be a period of time when the right thing to do is make sure that we get the maximum value out of this transaction. I do think there are some growth opportunities that could require some investments as we expand the territories and the geographical footprint of the combined company. But you never know when opportunities may present themselves like this one did.

Well I think as a company we worked hard to get to this point to pursue growth.

We have developed.

Our strong business good brands good products good people.

And have a strong balance sheet so.

At this point, we need to get our arms around Carl started and maximize the value that this brings to the table for our customers and our shareholders and we do think it's significant it's accretive right out of the gate.

Strong opportunities in growth and synergies.

So I think theres going to be a period of time that the right thing to do is make sure that we get the maximum value out of this transaction.

Do think there is some growth opportunities that could require some investments as we as we expand the territories the geographical footprint of the combined company.

But you never know what opportunities may present themselves like this one did so we want to keep our company in a position in our balance sheet in a position where.

Opportunities as they become available we can pursue.

David A. Martin: Got it. Is there, you know, has the company changed in composition and size? Is there a revised leverage target?

Got it.

Is there.

As the company companies.

And the composition and size is there is there were revised.

David A. Martin: that you're sharing. No, I think, you know, obviously, this transaction enabled us to maintain that conservative profile, and it doesn't, we're not over our skis with respect to the debt that we took. and we can continue to build strength and then maintain flexibility for the future for growth, not just investments that can come in the form of an acquisition but also investments inside our company, like Paul's talked about, territories, products, whatever. I like where we sit with respect to where our leverage is now and will continue to have that. Again, it's all about flexibility.

Leverage target.

Then youre sharing.

No I think.

Obviously this transaction enabled us to maintain that conservative profile and it doesn't we're not out over our skis with respect to the debt that we took on this deal in.

Right now we are on a pro forma basis, one three times. So we want to stay in this general territory.

As we digested a transaction obviously the flexibility we have to pay down debt with cash flow is important as well.

We can we can continue to build strength and.

And then maintain flexibility for the future for growth.

Investments that can.

Come in the form of an acquisition, but also investments inside of our business like Paul has talked about in terms of growth.

Growth territory.

Territories products whatever so.

We like where we sit with respect to where our leverage is now and.

And we will continue to have that.

David A. Martin: Got it. Thank you. And last, last follow up. I know there's no guidance.

Again, it's all about flexibility.

Got it thank you and last last.

Follow up on I know, there's no guidance volumes are down.

Paul George Reitz: Volumes are down. Are there any other headwinds or tailwinds that we should be thinking about when we forecast 24? I don't think so.

Are there are there any other.

Headwinds or tailwind.

That we should be thinking about when we.

Forecast 24.

Paul George Reitz: I think we've touched on that pretty well. You know, again, 20, 23 was a very good year, as we reported this morning coming off a really strong 22. I don't think anything we're seeing at 24 is different than what you've already seen in the marketplace.

I don't think so I think we've touched on that pretty well.

Again 2023 was a very good year as we reported.

This morning coming off a really strong 22.

I don't think anything we're seeing a 'twenty four is different than what you've already seen in the marketplace. So no I think we've.

Paul George Reitz: So, no, I think... We've provided enough color. You've heard enough from others. And again, what we will work towards is getting a good understanding in place of what Titan and Carl Starr look like together. Articulate that for not just 24, but also work towards articulating that for the future. Because again, I think that Titan and Carl Starr are going to be better together.

We've provided enough color you've heard enough from others.

Again, what we will work towards us getting a good understanding of plays to what Tyler tightening Carl start look like together.

Articulate that for not just 'twenty four but also work towards articulating that for the future because again I think the.

<unk> tightened it Karl start are going to be better together. So we'll put our heads down for a little while and work on getting that information for it.

Paul George Reitz: So we'll put our heads down for a little while and work on getting that information for it. Got it. I appreciate it. Thank you very much. Thank you, Beth. Thank you. The next question, I'm sorry, follow-up question comes from the line of Steve Ferazani with Sidoti. Your line is now open.

Got it I appreciate it thank you very much.

You bet.

Thanks.

Thank you.

The next question Im sorry, a follow up question comes from the line of Steve <unk> with Sidoti.

Your line is now open.

Stephen Michael Ferazani: Hey, thanks for taking an additional question. I don't want to harp on this, but it's the question I've been getting for two months, and it's accelerated over the last couple of weeks. Again, back in the day, there was a 10% or 15% decline for large tractors, depending on whose call you listen to, but you're down 18% in ag this year, almost entirely on de-stocking, which accelerated through the second half of the year. Everyone's kind of trying to do the math on this. If you're already down that significantly in what was an okay year, that would, I mean, the simple math would say that you're more flat. And I don't want to pin you to a number. The math would say you're kind of flattish in ag because of how much you were hit by destocking this year.

Hey, Thanks for taking an additional question.

I don't want to harp on this but it's a question I've been getting for two months accelerating over the last couple of weeks.

Ken back to you as a 10% or 15% decline for large tractors depending on.

Yes.

Paul you listen to but you were down 18% in AG. This year almost entirely on Destocking, which accelerated through the second half of the year everyone's kind of trying to do the math on this if you are already down that significantly in what was an okay year.

I mean, the simple math would say that you were more flat and I know you don't want opinion number. So the math would say you are kind of flattish in AG because of how much you were hit by Destocking. This year I mean is that a reasonable way to think about it.

David A. Martin: I mean, is that a reasonable way to think about it? Look, I'm getting this question all the time. I have to ask. That's a great question, Steve. Obviously, as we come into the year, it's certainly not flat. I mean, flat isn't probably in the equation, but certainly something less than the full impact of the market. We really can't put a fine-tuned number on it.

Getting this question all the time I got to ask.

That's a great question Steve.

Obviously as we come into the year.

It's certainly not flat isn't probably in the equation, but certainly something less than the full impact of the market being down.

We really can't put a.

Fine tune a number on that.

Stephen Michael Ferazani: Okay, that's a try to ask, thanks. Thank you. There are no additional questions waiting at this time, so I will pass the call back over to Mr. Reitz for closing remarks. Thank you. I appreciate everybody's attention on today's call and the opportunity to hear us talk about the Carl Starr acquisition and how Titan and Carl Starr can be better together. So thank you and I look forward to talking to you again soon. (Inaudible) Thank you for attending today's presentation. That concludes our call. Thank you. Have a great day!

Okay. That's I'm trying to ask thanks, guys.

Thank you.

Okay.

There are no additional questions waiting at this time.

I will pass the call back over to Mr. Wright for closing remarks.

Thank you I appreciate everybody's attention to today's call and the opportunity to hear us talk about.

The <unk> acquisition, and how tightened and Carl start can be better together. So thank you and look forward talking to you again soon.

That concludes.

Thank you for attending today's presentation.

That concludes our call. Thank you have a great day.