Good morning, ladies and gentlemen. And welcome to the Titan International, Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants have been placed ona listen-only mode and we will open the floor for your questions-and-comments after presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Todd Shoot, Senior Vice President, Investor Relations and Treasurer for Titan. Mr. Shoot, the floor is yours.

Thank you, Victoria. Good morning. And welcome everyone to our fourth quarter 2021 earnings call. On the call today, we also have Titan’s President and CEO, Paul Reitz; and Titan’s 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 a reminder, during this call we would 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 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 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. Good morning, everyone. Titan had a great finish to the year with our fourth quarter to add that to be tremendous 2021for us. The days really go by fast as we are already sitting here into March and we see numerous positive aspects our business lining up well for 2022 and beyond that. I really want to comment though that I am very pleased with what our Titan 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 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 David will of course dive in deeper to the financials and cover that from all angles. So as we look at the year, we grew our sales over $520 million, with a solid $120 million that or 23% of that flowing into operating income gains, that led to our 2021 adjusted EBITDA growing 2.5 times over 2020 to $135 million. It’s only happened one other time in Titan 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-point higher than our Q4 average over the past 10 years. David will share more financial information later. But as I said, I am very pleased with what type has accomplished in 2021. But what’s more important is that we feel well positioned going into 2022 to keep riding that phenomenal tidal wave that’s out there. In the world of agriculture, which is our breadbasket comprising 53% of our sales, we…

Thanks, Paul, and good morning to everybody on the call today. The fourth quarter concluded very strongly and it capped off a year that we 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 2021 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 will begin with the major highlights for the quarter and the year. For the sixth quarter -- for the fourth quarter we had a six quarter in a row of sequential sales growth. This 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. 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 sales and the corresponding working capital requirements. And then, finally, our net debt leverage fell to 2.9 times at year end. We expect an even stronger year in 2022, which Paul already discussed and I…

Thank you. [Operator Instructions] And our first question comes from Steve Ferazani from Sidoti & Company. Please go ahead. Your line is open.

Good morning, everyone. Paul, David appreciate all the detail on the call. I want to get a sense on the much stronger sales in 4Q versus even 3Q, typically you have got some holidays there, can I say, how much you have caught up on the labor front in the production capacity as you go into what could be a stronger 2022. How you are prepared to manage the stronger sales and how you did in 4Q?

Well, we continue to execute on increasing our labor force by most importantly along with that is our labor force continues to get stronger as the training continues to synch 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 sign that have incentive clause in North America. So look to continue to drive further improvements on 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 that with incentive clauses to help driving further output for this year.

Okay. When I think about David the guidance you gave for free cash flow, I am trying to sort of, I am looking at my model and clearly there’s going to be the build in working capital won’t be as steep even though you are going to have sales growth. I am 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, as you look through the -- how you model, we can certainly talk about that later, but we do have some impact from working capital. We have some working capital growth built in. But we don’t believe that our inventory levels are require significantly more investment than where we have been. We have been really working really hard to determine that balance to manage inventory and we are in pretty good shape. And we will see some growth in the first part of the year just because of the natural climate will have, but 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 have been getting a lot of questions, I am sure you have as well in terms of. I mean one, if you can just walk with the AIF [ph] stock transaction, where your Russian venture stands now and just your general perspective thoughts on the Russian venture given the current Russia-Ukraine conflict?

Yeah. Steve, it’s David. I will take the first part. We did execute the stock repurchase earlier in the month without AIF it was all according to everything that we needed to do from a regulatory standpoint and obviously it was well before this -- the conflict started and we are 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 have stated on prior calls and we have a really strong management team. They are always been good at handling challenges, including the one they face now. We got a business that has a strong market share within the CIS region. We don’t export a lot outside that region. I think that’s an item of note that is important as well. We have talked about long-term exporting more, but really our business has a high market share within that region. The one item that I really think is important is what we have seen throughout the last couple of years around the world is the products that we produce are critical to not just the customers that we serve, but really the societies in the overall food supply of the territories that we operate in and certainly that is true there. At this moment we are in compliance with all current sections relating to the Ukrainian situation. There is no material impact to our Russian operation or really our other Titan facilities at this time and we will continue to move forward from there.

Great. Thanks for that. I will turn it over and get back in queue if I have addition questions. Thanks very much guys.

Thank you.

Perfect. Thank you, Steve, for your question. Our next question comes from Komal Patel from Goldman Sachs. Please go ahead. Your line is open.

Hi. Thanks so much and nice show this quarter and in 2021. Thinking about 2022 and the visibility that you have, after the consecutive quarters of strength that you have experienced, are you seeing any deceleration in your order books at this stage. I know the backlog 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 are going to continue to work hard to produce as much as we can.

That works. Maybe the second question is, in light of some of the continuing challenges on raw material, supply chain, labor, etcetera. If you could touch on pricing, any need to take on additional pricing, any kind of capacity that you think that you have additional room versus peers to pull that lever further if needed? Thanks.

Yeah. Obviously, as we progress through 2021, there were required adjustments that we needed to make to pricing relative to not just raw material cost, but the logistics costs, energy costs, labor, all the different inflationary components. And I would tell you that, we have -- we work really well with our customers and given them that transparency around our pricing relative to those costs and we worked really well in 2021 and we fully expect that we are going to be able to do the same thing in 2022.

Yeah. And I think as far as our footprint is extremely strong in relation to meeting the needs of our customers and further derisking their supply chains. And so as we continue to add volumes clearly at the benefit into our efficiencies and we see that we need to continue to add capacity, we need to add labor, continue to add that capacity in the key core strategic areas. We are not trying to veer off into anything new or different or take volumes that maybe in the past we haven’t been focused on. So I think we just remain disciplined. As David said, with our costs in relation to our pricing, we 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 Ag sector, we think the tidal wave has got a multiyear like to it and we see this continuing into 2023 and beyond as well.

Great. If I could squeeze one more in, leverage has come down a lot. The 2.9 versus your 3 times or 4 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, if you could just elaborate on that, could that be potentially debt funded. If you could shed some light there that would be great.

Yeah. Komal, I don’t -- 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.

Yeah. The point is that we have the optionality…

Understood.

We have the optionality to work around the variety of components, obviously, investing in the business, paying down debt that we -- where we feel it’s warranted or opportunistic and then the potential for shareholder returns so.

Got it. That’s fair. Thanks so much for the color.

Thank you.

Thank you so much for your question. And our next question comes from Kirk Ludtke from Imperial Capital. Please go ahead.

Good morning, guys.

Hi. Good morning.

Thanks for the call and the updated presentation. Very helpful. And just a quick follow-up on the capital allocation topic, is 3 times to 4 still your target range?

I would just say that we are in a very healthy range and we have the opportunities to do the right things for all of our constituents. We do feel obviously a lot more comfortable with 3 times to 4 times and we are going to be in the low 3 times here for a bit of time as well and we are obviously look at the right things to try to drive returns in a better way with that comfortable level.

Great. Thank you. So there was a time when you were hoping to get to 3 times to 4 times. Now you are below it, look if I am doing the math right, without any distributions to shareholders, you will be closer at 2 times at the end of 2022. So does that 3 times to 4 times move down, would you prefer to run the business as a, say, a BB as opposed to a B type growth?

Well, obviously, a lot better credit and as a CFO I always love. I want to be in a comfortable range. But again, I want to think and make sure that we and our Board are totally aligned as to what we are doing to try to drive returns for the long-term and so that may need some investments in the business to try to drive that. And -- but, again, I feel like if we stay in this 3 times range, like, w e have the options to do that.

Right. Do you think of leverage as a -- over the cycle or I mean how do you think about your leverage, it is still a cyclical…

Okay.

…even though you are in an upswing and you think it’s a multiyear run, I mean, you are still, it is a business where earnings have been volatile historically. I mean, just curious how you think about leverage?

I want to be able to maintain their levels of leverage 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 there is a lot of concern about maybe a recession in in Europe and I -- slide four is very helpful. It shows where your facilities are located and none of them other than the Russian tire plant are in the -- look to be in a Warzone. But do you have a sense for, at this point, you might not have this visibility, but do you know, your facilities are, obviously, you know where your facilities are. But where does your equipment -- where is it actually use, do you have any visibility into that?

We know where our products are shipped to. I think you would have to look at the follow through from our main customers to see exactly where it’s used. We are going to follow those trends as to where the equipment actually gets used within our main customers. But to answer your question specifically, no, we ship directly to their point of manufacturing and assembly.

Got it. Any comments on what you see or what you expect to see in the Ukraine this planting season, is it just too early to say what’s happening there?

Yeah. It really is, I mean, it’s too early to say. I think what we are looking at is obviously the commodity prices, you look at the current inventories in the U.S. are light. You look at the South American situation where their yields are going to put some pressure on other areas. So I think in a broader scope we are looking at farmer incomes, we are looking at commodity prices and all that is very strong. How that all gets sorted out with production and where the production ends up getting exported to, it’s just still too early to tell on that.

Got it. Then lastly -- thank you. And then lastly, does the agreement with Kubota, does that improve utilization rates or how does that affect your financials and then I will hand it off. I appreciate it. Thank you.

Yeah. It’s a win-win for both sides. I think that we are very excited about Kubota has a product that will be. We have a new product, let’s say, differently, we have a new product that we are going to be partnering with Kubota, it will be private label with Kubota. So it will 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 are excited about and it’s a great way for us to position new product into the marketplace with a leading customer in that space as well.

Great. Thank you very much.

Perfect. Thank you, Kirk, for your question. Our next question comes from DeForest Hitman from Walthausen & Co. Please go ahead.

Hey. Thank you for taking questions from shareholders. Can you talk about this 10,000 foot in question, 10 years ago we had over $2 billion in sales and the EBITDA profile, those sales were different, and obviously, 10 years have passed. But can you just help people understand what the difference is now versus 10 years ago and how it aligns your thinking around the $175 billion of EBITDA?

Yeah. Absolutely. When you look at our company today, our breadbasket 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 and undercarriage is a strong global leader, tremendous OEM brand and product, good aftermarket presence that continues to grow, a strong foundry there in Spain, and so it’s a good diversified business that you see now picking up the bulk of our EMC sales and earnings. And when you look at our Ag sales and earnings, you see good strong businesses that have 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. Where I see things today is our earnings are coming from good strong core businesses. And so these are not areas that we are stretching out into a LAM. We are trying to reach in the cracks in the marketplace. We are 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 have outlined with our guidance for 2022.

Okay. That’s helpful. Separate topic, I think, a lot of industrial companies that have reported, we have been hearing lots and things about supply chains, raw material availability, labor issues are still dealing with, I don’t think we spoke at length about those. But maybe can you help us understand what makes Titan have in on ability to execute well in 2022. You spoke about unions in the past, labor availability there, can you talk about how your security from a labor perspective and dynamic go on to simplify your business, but making a tire, making a wheel, making metal parts. It seems like we have got steel, we have got a rubber, lot of steel dyeing, steel cord is readily available. So can you just update us in terms of your view of the logistics, supply chain and labor, as it relates to 2022 and how it’s going to allow you execute well going forward?

I mean, it starts with the team that we have. We have a really strong one type global team. We have been talking about that for a number of years even during the downtimes, what we kept references, we were building a good strong foundation with the team that we have. And as I noted on, not just today’s call but in prior calls, I could not be more pleased with how our team has operated across a very dynamic business environment as you illustrate, there is a lot of moving pieces out there in today’s world and here at Titan our secret sauce just starts with our people in our team. We have 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 are very good at dealing with those issues. We are managing our customers well. We are here to serve our customers with our strong production footprint. The 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 you see evidence in our 2021 results, how we have been able to perform through these challenging times and we continue to believe that the one Titan team will continue to execute as we have.

Okay. That’s helpful. And as it relates to the guidance and I understand things are probably changing in real time, historically you have disclosed revenue contribution from the Russian operations. But as it relates to $125 million EBITDA guidance, are you willing to disclose your expectation through the EBITDA mix within that $175 million if that relates to the Russian operation?

We only report based upon the segment as you see in our results. In our 10-K we disclose that the Russian business comprises roughly 5% of our overall total sales. But as the general practice completely unrelated to what’s currently going on with that situation. We just do not disclose by business units any information beyond what you would see the 10-K related to sales. So, really how we look at our business is based upon farm, Earthmoving Construction and Consumer. So 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...

Thanks for taking my question.

One comment I will make is, yeah, certainly it’s all factored into our 2022 guidance though. We were taking all that into account.

Okay. Thank you for taking my question.

Perfect. Thank you for your question. [Operator Instructions] And our next question comes from Alex Blanton from Clear Harbor Asset Management. Please go ahead.

Hi. Good morning. Congratulations on the quarter. I just wanted to clarify the tax benefit, what would your taxes have been without the benefit?

For the quarter it would have been roughly about $4 million to $5 million I believe without the...

Did you say $4.5 million.

No. I said I just got clarification from our Chief Accounting Officer. So I -- he told me it would have been $8 million for the quarter.

$8 point -- $8 million even.

$8 million roughly.

And when it is expected -- what’s your tax rate is 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, roughly.

Well, I guess, this is in…

Similar to 20…

…taxes are going to be in income per se…

…2020…

I wonder what taxes will be? What taxes will be for tax rate will be in the income statement?

I don’t have that out of the top of my ahead. I can get it for you later. But like I said about $16 million is the lower -- the expectation here.

Well, now what you are paying? What’s going to be in income statements is what I am interested in?

Yeah. That’s roughly it before any special allowances that might be able to take or any benefits that we can take as well. So that…

Okay. That’s a…

That is the expectation I am giving for now Alex, $16 million.

Okay. That’s not tax, that’s sort of rate, that’s not tax rate.

I understand. You can do the calculation in your modeling, okay, so.

Well, I have to know which three taxes are going to be to get the rate.

That’s not part of our guidance, so.

Okay. Well, let’s go on. The tax benefit then is included in the adjusted earnings?

Yes.

Yeah. So if I apply 25% tax rate to the income, earnings come out about $0.18, correct?

I believe that’s the math, yeah.

Yeah. So why didn’t you adjust the earnings for the tax benefit.

We could have.

But why didn’t you.

Paul.

Yeah. I mean we have had variation in adjustments related to valuation allowances in 248 [ph] adjustments for a long time. So it’s not -- it’s just not…

Yeah. But the…

… in order part of the..

But those variations grow your earnings out of short-term. The purpose of adjusted earnings is to smooth out these earnings and present a more realistic number. So I am just wondering, why you didn’t you do that.

Standard practice has not been to adjust it, so that I just leave it at that and it is clear in the numbers that we outlined there in our remarks and the press release.

Okay. Let’s go on. The incremental 22% for the year in the upper earnings that we talked about at the beginning, all right, do you think that’s sustainable going forward or do you expect it might increase?

Yeah. Inherently in our guidance for 2022 that is the case, 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 have put in place last year, and yes, that’s implied in our guidance that margins will continue to expand.

Yeah. That’s an operating incremental is pretty good. So you think you can sustain that going forward at least for a while?

Yeah.

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

Let me…

Just what your capacity is?

Well, Alex, I think that’s the point we are 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, mentioned earlier as well and we put out a press release out on it. We very much look forward to our North American union contracts with some new incentive clauses that we put in there that will only help improve the output that we can get from our plants on again a more effective efficient basis as well.

Yeah. On the commodity front, commodity prices are benefiting from the fact that Russia and Ukraine major producers of gain, wheat and even corn, soybean oil and those are obviously going to be in shorter supply than they would have 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?

Right. 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 being a multiyear cycle. There are a number of positive attributes that exist that will continue to propel this market forward. So there is not one is not one pillar that could fall that crumbles 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 demand that you 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 has got some legs on it because of there were number of forces. So I think regardless of where commodity prices go instead of trying to predict that precise level. I think my comments would just -- my belief, I should say, not my comments, my belief is 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 already strong. So, again, I think, you got to look at the big picture on that, Alex, and the answer becomes pretty evident.

Yes. No. I am not sure you said that you are not going to really comment on the -- what might happen there?

What I look at it and we have said this before, I mean, we did 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 have seen throughout the pandemic, our products are critical to the infrastructure in 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, we will continue to monitor, but really don’t see anything more beyond that, Alex.

Yeah. Just one more thing on that, those -- that business, is it mainly domestic, it would be affected by export controls?

That’s correct. We primarily operate in the CIS region. That is correct.

Yeah. So would it be affected as well if there are sanctions against exports that wouldn’t affect you?

No. We primarily operate within the strong agricultural region there in the CIS. So we have talked on previous calls, to be clear about the ability for that operation to export more in the future, but at this 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. All right. Thank you very much.

Yeah. Thanks, Alex.

Perfect. Thank you, Alex, for your question. And our final question comes from Jack Voigt from Balyasny Asset Management. Please go ahead.

Hey, guys. Thanks for taking the question. See -- 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 Jack, you said that you would start, Russia is about 5% of our sales, again, that is rubber that is -- those are tires. And then if you look at Europe, there is very little, if any, Ukrainian sales that were in 2021, is just not a big part of what we knew. Our sales are really within the Western Europe and then within the CIS region for tires.

Got it. So you mentioned you don’t export a lot out of Russia, I’d assume that means finished product. Are you guys exporting rubber out of Russia to other continents to make finished product and if so what percentage of your rubber production is Russia?

Yeah. We do not export rubber for other parts of the world, simply put.

Got it. And then you talked about capital allocation, your 2022 guidance is implying pretty significant amount of leverage for cash flow, talked about returning that to shareholders over time. So how do you think about potentially implementing a dividend versus buyback stock?

Yeah. There are options around the table. We have not made any decisions at this point in time, but again we have that optionality and we will make in consult with our Board, we will make the right decision at the appropriate time.

Got it. Helpful. Thanks for the time. Congrats.

Yeah. Thank you.

Perfect. Thank you, Jack, for your question. This concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Reitz 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.