Titan International Inc (TWI) 2022 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to Titan International, Inc. First Quarter 2022 Earnings Call and Webcast. (Operator Instructions) It is now my pleasure to turn the floor over to Todd Shoot, Senior Vice President, Investor Relations & Treasurer for Titan. Mr. Shoot, the floor is yours.

Thank you, Sam. Good morning and welcome everyone to our first quarter 2020 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're about to review are presented in the earnings release issued yesterday along with our Form 10-K which, I'm sorry, 10-Q which was also filed with the Securities and Exchange Commission yesterday.

As a reminder, during the 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, as well as our latest Form 10-K and Forms 10-Q all of which had been filed with the SEC.

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

Q1 earnings release is available on company's website within the investor relations section under news and events. Please note a replay of this presentation will be available soon after the call within the investor relations section on the company's website and a copy of today's call transcript will be made available on our website as well. In addition, our latest quarterly investor presentation is available on our website currently.

I would now like to turn the call over to Paul.

Thanks Todd. Good morning, everyone. A couple months ago in early March, we released strong results and expectations for 2022 that really illustrated the progress we have made of the company in recent years. I have to start off today's call by saying our first quarter took that ball and ran with it hard as our results were excellent this quarter and really a good way to start in 2022. We posted Q1 revenue of $556 million which was our highest for a quarter since early 2013. The top line growth was well supported with strong flow through into operating gains as our gross margins improved to 15.6%.

That led to our Q1 adjusted EBITDA coming in at $57 million up over $30 million from last year. Our adjusted EPS came in at $0.44 a share compared to $0.7 last year. Again, it was a very first quarter for the Titan team.

David will share more financial information and I'm now going to switch gears over to the market landscape. With our year end results, we stated that we believe there were numerous positive aspects going for our business and end markets that were lining up well for 2022 and beyond that. We continue to believe that is the case in our first quarter results and 2022 order book provides support along with a number of other market factors that I'd like to point out.

Let's start off by looking at commodity prices that remain at high levels and are well supported with global supply demand dynamics that bodes well for future prices. The strong commodity prices combined with supportive government programs have positioned balance sheets for the global farmer in a really good place. These economic factors combined with an ace fleet, along with continually low and (inaudible) 0:04:00 low equipment inventory levels especially for used equipment, a large AG really create a robust demand environment for the foreseeable future.

So, elaborately elaborating further on that these market forces combined with delays in order deliveries from the OEMs as they work through some production challenges really provide support and momentum for a multiyear demand cycle. I spoken previously about surveys related to the AG sector, and I'm sure a lot of you follow them as well. So I want to take just a quick minute and comment on some of those recent surveys that have shown a drop in farmer sentiment. I want to state that I believe those surveys should not be viewed as a reduction in overall demand level at this time but rather there should be seen as a result of OEMs pushing out end users orders and also the spike in farmer input costs such as fertilizer.

If you look at the factors I mentioned previously, that provides strong, longer term support, that really those surveys are not necessarily designed to catch as they're really grabbing the short term noise and the responders mindset at that moment that they're given their responses. So, you know, looking at the OEM market, we do believe that we're really in a good position with our order book and really were things are trending for again 2022 and beyond.

So if you now switch over to the aftermarket, we are still reflecting a strong demand environment for replacement tires, amidst the shortage that you're seeing in available equipment, along with really the strength of our LSW products. We've mentioned that many times that LSW can make existing equipment perform better. So if you look further down the road, it still does not appear likely that 2022 OEM production levels are going to put much of a dent in the low dealer inventories, especially in large AG. So you're looking at 2023 before meaningful inventory replenishment could take place and unmet 22 retail demand will just keep carrying forward into future years.

Again, the point being with that there are a good number of positive forces in the AG sector and appears this positive AG wave is going to keep flowing. And why we can be viewed as an AG driven company. Let me switch gears over to earthmoving and construction. It represents 35% of our sales and of course it's where our under cares business as a major global player. We stated last quarter and still believe that our EMC segment continues to look promising as you have the expected infrastructure investments that will kick into gear this year next year and further down the road. They will continue to provide supports, further support to the demand levels that remain strong at current times.

We continue to see demand and orders are really good level but similar to the AG OEMs there is production pressure to meet those turn orders. So I think we sit in a very good position where we -- that demand cycle will just have a longer tail to it. When discussing the EMC segment, we often speak about our ITM undercarriage business and its strengths as a company. I do want to take a second though and touch base on our Bryan, Ohio plant.

In the plant -- in the past this plant was nearly 100% EMC and we have previously stated that we have shifted away from producing supergiant tires acceptance and low risk cases where we know the customer and the application are appropriate. And over the past few years our team has really worked hard to transform Bryan strong production capabilities into a mix of construction earthmoving and now AG. In fact in recent months, Bryan plant production has been right around the 50% AG level. It's driven by that continuing growth of our large LSW products in the launch of our new AG edge line.

This transformation with Bryan has ushered in a solid improvement in their financial performance. Along with the continuing investments we were make to increase our LSW capacity in North America. We are also investing to improve our efficiencies and construction forestry to ensure that our Bryan, Ohio plant keeps moving forward in a positive direction.

Our 10-Q provides an update on Titan's Russian operations. I would like to state here that Titan understands the gravity of the crisis in Ukraine has contributed to organizations supporting those humanitarian needs. We also understand the struggle that millions around the world are facing from escalating food costs and food shortages. And we are doing our part in the AG world to help with that troubling situation.

So wrapping things up here, you know on a global basis, our Titan team will continue to be there to meet our customer's growing expectations. We have an impressive and extensive global production footprint that is staffed with exceptional people that day in day out are producing quality, innovative products. Based on the strength of our Q1 performance and really the salad market landscape that we see we have now increased our 2022 expectations and are expecting full year net sales to be above $2.1 billion with adjusted EBITDA to be around $200 million.

I also want to add that the improved expectations had driven an expected increase in our free cash flow to the range of $55 to $65 million. This updated outlook is a nice increase over a preset previous expectations. But I do want to say that we do put a lot of effort in our forecasting process. These positive updates are not because our finance team is just guessing or sandbagging with the forecast. But it really reflects the tremendous job our Titan team is doing battling through whatever challenges are put in front of us. And our ability to keep moving forward to improve our business and really be there to take care of our customer's end-user's needs.

I do want to add that these are things -- there's a lot of things that we've done through the years that have put us in this position where we can raise expectations. You know, in recent years, we've made structural changes to our company by improving or eliminating underperforming businesses. We have restructured our product portfolio to remove inefficient and negative margin products while continuing to introduce market leading innovative products that connect us to the end user. And like I've said many times make equipment perform better with our LSW.

We have implemented intelligence in our pricing models that are able to handle a constantly changing landscape. And overall our plants and our production teams have consistently implemented changes that improved our efficiencies and really our overall quality rates. But perhaps most importantly, our one Titan team has been exceptional time and time again in dealing with the challenges while we continue to move our business forward.

I want to take a moment just to share the fact that we recently published our first comprehensive sustainability report. It's now available on our website. We have been on our (inaudible) 0:11:00 journey for some time now and it's important to share our progress. We have a strong commitment to continuous improvement of Titan. And we fully understand our impact on the world when it comes to not only the environment, but also our workplaces and the communities within where we operate.

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

Thanks, Paul and good morning. Our performance this quarter truly demonstrate how far Titan has come as a company and we believe that we have many exciting things ahead for us. Let's start with the biggest highlights for the quarter. Q1 represents the seventh quarter of sequential sales growth and net sales grew 14% sequentially from Q4 and 38% from last year in the first quarter.

Our gross profit grew 63% from last year and our margin reached 15.6% which is the highest we have seen in almost a decade. Adjusted EBITDA for the quarter was $57 million increasing $21 million from last quarter and $31 million from Q1 last year. Our cash balances were stable again this quarter at $98 million, even with growth and working capital that came on continued sales growth. Last but not least, our net debt leverage fell to 2.6x adjusted EBITDA on a trailing 12 month basis which is down from 2.9x times at year end.

Paul already updated you on where we're -- where we see the year going now, which is tremendous performance with growing momentum in the business. I will update you on a few other key metrics for the year in a little bit. Well, here are a few important points relative to segment performance in the quarter, starting with AG. Agricultural segments net sales accounted for 56% of total sales this quarter, and were $310 million and increase of $101 million from Q1 last year. And it was up sequentially from Q4 but almost $45 million representing 17% sequential growth.

We had strong growth from both aftermarket and OE this quarter with a healthy production balance. We also had good balance between growth and volume and the impact of higher pricing are reflecting cost of raw materials and all the other inflationary costs impacting the business. Each of our major global regional businesses experienced growth in the segment year-over-year. And currency devaluation impacted sales in the quarter by almost 6% relative to Q1 last year.

The agricultural segment gross profit first quarter was $48 million up from $30 million last year representing 61% improvement. The gross margins were 15 and a half percent for AG up from 14.3% last year in the first quarter and 14.2% in Q4 last year. Our growth and gross profit margin was impressive in the quarter driven largely by improved profitability across all of our production facilities and the efficiencies we were able to drive with a more seasoned workforce after adding labor capacity last year.

Our earthmoving and construction segment experienced strong quarter as well. Overall net sales for EMC grew by $36.5 million or 22% from last year in Q1. It's also compares favorably to the fourth quarter 2021 levels with sequential growth of $18 million or 10%. Again, all the major geographies experienced year over year growth during the quarter, with the largest growth coming from ITMs and undercarriage business which grew 25% from first quarter of last year.

Growth for the segment was driven by increased pricing relative to higher raw material costs and the other cost inflation during the quarter as well as healthy volume increases across all of our operations in partially offset by currency devaluation of 3%. Gross profit within the EMC segment for the first quarter was $31.4 million which represents an improvement of almost $12 million or 59% from gross profit last year in the first quarter.

Our gross profit margin in the EMC segment was significantly better at 15.6% versus 12% last year. Again, the largest driver of the increased profitability came on the increase in sales and ITM while growth occurred across all of our businesses and geographies across the globe year-over-year. Lastly, the consumer's segments Q4 -- Q1 net sales were up 51% or $15 million compared to last year. Many pieces came together for the quarter with certain specialty products that are sold in various parts of the world, including our custom mix -- mixing of rubber stocks in the US. We also had a small increase in sales of utility truck tires in Latin America, which had seen a few quarters of lighter activity.

The segment's gross profit for the first quarter was $7.4 million, a $3.7 million increase from Q1 last year and the gross margins were strong at 16.5% improved from Q1 ' -- 2021 margins, reflecting the positive mix of products and solid pricing.

Our SG&A and R&D expenses for Q1 were $39 million representing a 7% of net sales for the quarter. Again, like recent quarters, our expenses include variable spending and compensation, reflecting significant increase in sales and profitability during the period along with some provisions we made in the quarter relative to managing risks with our operations in Europe and in Russia, which accounted for approximately $1.3 million of the increase year-over-year.

As a percent of sales our operating costs are up to 210 basis points year-over-year. Our reported taxes on income in the first quarter were $8.7 million, which is reflective of our increased taxable income in the quarter. As a percent of pretax profits the effective tax rate was 26.1%. My expectation is that our income tax expense for the full year will still approximate $20 million, which principally represents our cash taxes for the year as well.

Now let's check in on our cash flow. Our cash balances remained stable at $98 million this quarter. Our operating cash flow was negative in the quarter, which was driven by the increase in working capital from the sharp increase in sales again in the quarter. We controlled our capital spending in the first quarter as well. And at $7.6 million which is slightly lower than what we spent in q1 last year.

I continue to expect that the full year capital expenditure target would be $40 to $40 -- $45 to $50 million. While we will continue to monitor cash flow relative to ensuring we are investing in our growth initiatives and in also ensuring the maintenance of our production facilities and making sure that we have robust operations, especially as our volumes are very high.

As we reported a few weeks ago, we sold our real operation in Australia at the end of the first quarter we were able to generate approximately $17 million between gross proceeds from the sale and the cast to be repatriated. Approximately $5 million of the total cash flow from the transaction remained outstanding from the buyer at the end of the quarter, which was subject to post closing review of the accounts. The majority of this amount has been paid -- was paid by the buyer in the last few days prior to this call.

As we have discussed on previous calls, we remain very focused on managing across the business, especially in this high growth era. At the end of the first quarter our liquid working capital as to percent of annualized sales based on the most recent quarter was 19% which was stable with yearend. But more than a year ago at this time at 21%.

We also measured this in terms of days outstanding or the cash conversion cycle which was 75 days at the end of Q1 compared to 81 days a year ago. The discipline that we have created is intact. And in fact there are initiatives underway to further improve our practices, which is expected to be realized over the course of 2022. I mentioned that at the outset that our debt leverage at the end of March improved to 2.6x trailing 12 months adjusted EBITDA down from 2.9x at yearend. I remain confident that we can prove our leverage position over the course of the year based on our expected financial performance. And we are in a strong and stable position for the future at this level of leverage.

Our financial performance in the first quarter show the power of the business and the collective decisions that we have made to position the company for a stronger market backdrop. Paul discussed it earlier but our full year outlook has improved based on our first quarter performance and our improved visibility over the next several quarters with our customer order decks, our forecasts and improving production capabilities.

With sales expectations of $2.1 billion and the EBITDA target of $200 million we expect that our cash flow for the full year will also improve from the guidance we stated last quarter. We believe we can generate between $55 and $65 million in free cash flow in 2022. This is based on lace profitability working capital and CapEx forecasts.

We expect that we will gain momentum and free cash flow generation as we progress through the year and as follows our traditional seasonality and work -- lower working cat working capital requirements during the second half of the year. It is a paramount target for our management team to generate the free -- the forecasted free cash flow as it gives us further flexibility to bounce growth initiatives and to create further stable -- stability for Titan's future. So in conclusion and Titan's story is continues to build, it's a great story and it is exciting to share what's going on.

Now I'd like to turn out of the call back to Sam for any questions that you have today.

Thank you very much. We will now begin the Q&A session. (Operator Instructions) We'll now take our first question from Larry De Maria of William Blair.

Nice work today. A couple questions. First, I think we're looking for 18% top line growth now. Can you delineate let's say between price and volume now in the outlook?

At this point, I think what we're going to see going forward is similar to what we've seen in the past. It's a good mix of price and volume. We're making productive progress and increasing our production levels with the labor and the hiring that we brought on. We're getting that labor more experienced and trained so they're productive rates have gone up. We've implemented some new incentive programs and in our North American Union agreements that we've mentioned, and we've seen a nice uptick from that. And so we will continue to see in our forecasts, in our updated guidance that we gave, you know, increases in volume that are very similar to what we've seen in the past along with price mix being relatively similar to the past as well.

And then obviously, one of your customers is having a strike. Can you talk to us about how that plays out in your guidance? How you're thinking about that? How to -- what the expectations around that are?

Yeah, let me -- I answer that from both perspectives. The first from the teenage side and having spent time with their CEO. I mean, he's a strong experienced leader. I know his focused when he came into the role was to really work hard on their supply chain, their production. With his background and his experience I know CNH is moving in a good direction in relation to that. So from CNH side you know, day 2, it's difficult to predict at this point what happens, I certainly hope them the best to work out that situation as quickly as possible.

But again, I can say personally, I have a lot of confidence in CNH's leadership. But from Titan's side, you look at where we sit -- where we have a strong order book, the demand we have for tires. We can adjust our deliveries, our -- really at this point I don't see us adjusting our production schedule, but really adjusting our allocations and our delivery schedules as CNH works through their situation if needed.

At this point I'm not going to draw conclusions again, it's day 2. But if needed, we can we can adjust. I don't see that having a significant impact from how we continue to operate day-to-day. On the wheel side of the business it's the same, you know, we -- a lot of the wheels are similar, just different colors. And so we just need time to kind of run it through a production schedules and adjust. But at this at this point, I'm not going to make any predictions on where that situation goes. I know that they are -- they're working very hard on both sides of the fence to get things in a good productive solution. But from our side of Titan, I believe we'll continue to operate as we have been and again I do have a lot of confidence in CNH's leadership that they really as a company we'll continue to move in a good direction.

So essentially, your guidance doesn't contemplate any changes there based on the idea that you can probably move the production around if need be. Is that fair to say?

Yes, that's fair to say.

Next question is from Steve Ferazani of Sidoti.

I wanted to start by asking about the very substantial sequential growth in revenue off of 4-Q. I'm trying to get a sense of how much of that was beginning of the year price hikes? Or was that -- what drove or alternatively, what drove so much volume improvement sequentially?

(inaudible) 0:25:35, I think you had a couple of things. One, our pricing is evolving and it's a constant process, and we've talked about that not just in response to the inflationary cycle where we're now. But as a company, I'll point back to 2017, where we really put a lot of emphasis improving our intelligence around our pricing models and how we approach the value proposition of our products. And so pricing is a 12-month a year project that is constantly evolving. So there's not a January 1 change that necessarily drives everything.

So I think that along with -- as you look forward into the quarter, you got to remember, Q4 -- Q1, I should say, now look forward into Q2, I don't think that's the wrong way. But if you compare to Q4 to Q1, Q4, we do have holidays, we have plant shutdowns, we have maintenance. So there's a lot of production challenges that you don't have in Q1. I mean, Q1, you get the opportunity to really just run all out.

Similar with Q2. And so we talked about that in the past for Q3, Q4. It's not the seasonality necessarily within our order flow, but it's the maintenance of the plants, it's the production schedule as you get more vacation and holidays. So Q1 is a clean period for us. The work days and the off time is minimal compared to Q4, and we're really able to run quite effectively. And again, I have to take any scheduled off days. So very, very productive period for our team. And again, just as you look forward to Q3 and Q4, do keep in mind that you do have some plant maintenance that is required that we do take.

(inaudible) 0:27:17 Q1 typically turns into a slightly stronger Q2 and then a decline in Q3, Q4, that's so you're looking for more typical seasonality in that fashion?

I think so at this point. That at a historical pattern has been -- we feel good about our labor levels. So last year, we did a job hiring. We're continuing to work hard on the retention piece, and we're up -- I want to say we're up like 2.5% globally right now. So we feel like we're in a pretty good position with our head count. We do balance the fluctuation in production schedules at how we manage it through with over time.

So really, what you normally look at then is in Q3, Q4, you just -- you have weeks that you have to take out of the schedule for maintenance and especially in an area where we're running as hard as we are. So I know in prior years, you've seen kind of Q3 and Q4 trends be a little bit different. But the way I see things right now, we're very comfortable with our labor, where we sit, kind of let that labor continue to flow. We are hiring where we need in certain specific cases. But again, I think we'll just keep things running, assuming a steady state with the labor, you'll have a Q3, Q4 seasonality driven by some holidays and plant shutdowns.

Okay. That's fair. I want ask you question about consumer because it's probably -- it's the smaller segment. It's probably the one we talk about the least or the one I asked you about the lease, but significant growth there, again year-over-year in sequential and a really strong gross margin this quarter. Can you give a little bit of color on what's going on in the consumer business that might be different than the other two?

Yes, Steve, this is David. There are a variety of factors that played into that. We had a little bit of growth coming out of our utility truck tire business in Latin America. But one important component of it was we do third-party custom mixing rubber in one of our U.S. plants. And we've made some strategic moves to grow that third-party piece. And we saw some pretty healthy growth in the first quarter and we have, call it, healthy margins relative to that part of our business, and that was a nice component of it. Plus, we have a little bit of mix, if you will, between some of our smaller tires that go to a variety of different areas of the world that gets classified as consumers. So all those 3 pieces put together, it led to a pretty strong quarter.

I do want to circle, I think --

(inaudible) 0:30:11 no reason to believe that, that goes back from here, so.

So you expect that third-party business to be sustainable at least over the next few quarters?

Yes.

Okay. Fantastic. And then, Paul, I think you did a nice job at the beginning, talking about the sustainability of the multiyear replacement cycle. But clearly, it's the focus of a lot of investors right now. So I just want to follow up with my last question just on -- given higher food prices and the potential for any kind of demand destruction given the inflationary pressures on farmers, just your confidence that we're looking at multiyear given the issues and higher interest rates, given the multitude of issues that are potentially out there, your confidence on a multiyear cycle.

Yes. No, it's a good question, Steve. I'm going to start at the top of the pyramid where all of us are going to continue to eat and eat as we -- as well as -- you're going to see the retail and consumer inflation is going to have a much -- placements can have a much bigger impact on retail and consumer than it would on food. I know all of us -- the last thing we want to do is go home to our kids and say, guess what, we're having oatmeal tonight instead of chicken or beef. So I think we're in a good position where we sit when you just look at the top of the pyramid that inflation has less of an impact on our industry than others. And then you look at the impact on inflation with farmers' input costs, the way I look at it is the supply demand dynamics are so strong for agriculture that there's no way that the inflation will destroy those supply-demand dynamics.

So again, where you see inflation have a bit of impact is when commodity prices are low. But demand is high. We know the struggle that's going on with large grains around the world with crop output and just look at the planting cycle right now in the U.S. because of the mother nature has been quite wet for the last month. I think we're at like a third right now where we were last year at this time. So I look at the supply-demand environment. Steve, is overriding anything to do with inflation, especially because it's tied to food.

And so I think you started at the top of the pyramid and you kind of work your way down. What I feel good about is when you look at some of the metrics that are out there, I mean, they're talking about production impacting OEMs. But really, the impact has been from what I've seen, has been about 2%. So you're still in a very healthy growth environment. Now people may look at that and go, my God, the trend is going down, but it's going down by such a small level that from my perspective, as a supplier into the agriculture construction markets, I think that's a very good thing. It allows us the ability to manage our labor. As I mentioned earlier, we feel good about our labor. The last thing you want to do is have these cycles that run so high and wild and then low and destructive. And so I think we're in a really good position for our industry compared to history because you're seeing that growth be somewhat moderated by production issues, but they're still going up. They're still positive.

And so I like the way we sit as a company where we could manage our labor and our efficiencies better. I like the fact that demand is still strong in our sectors. But then kind of going to another layer of the pyramid, Steve, the customers I met with just recently last week, inventory levels are low. Inventory levels are very low. So the way you can moderate any fluctuations you have with inflation, with production issues. At the end of the day, we got to keep producing just because the dealers got to get more inventory under their lots. And what I'm hearing from our upper management, our customers is don't worry about where exactly production or demand goes because we have to absolutely continue to fill inventory. And the way you look at it, they're not going to get much of the inventory filled in this year, and that's where you start to see that carry forward into next year. So when we talk about a multiyear cycle, you've got strong supply demand, high commodity prices, strong balance sheets, low inventory. I think we're in a really good position not just for this year but next year as well.

Next question is from Komal Patel of Goldman Sachs.

Thanks for the helpful color so far. It's been really great. Maybe just one question following up on the CNH conversation earlier. The press release from late March that announced the long-term agreement with the company of $400 million across 3 years. I wanted to ask how does this compare to the business that you've already been doing with CNH? And is there scope for more business or this amount to grow from here?

Yes. No, there certainly is. The way we approach those long-term agreements is we want to develop consistency with a long-term agreement. And give us then the ability to increase in its scope as you move forward within the contract. So, our customer base is really strong. We deal both AG and construction with a global customer base around the world, and we feel very good about our customer base. And so when you structure an LTA, you want to do it with the mindset that it's got to be a win-win for both sides. So what we look for is consistency and commitment. And then with them, what they look for is that we can flex and adjust upwards as their situation changes and they may require more from us.

But we can't be sitting around waiting for that demand just to come flowing in if we don't have a good consistent baseline. We won't have the labor, we won't have -- we won't be trained. We won't have the scheduling process in place to be able to support them. So the way I see it is it's a win-win because, again, we get that scheduling -- we get that consistency that allows us to schedule, have labor, raw materials, et cetera, available to produce for them at a baseline, but it's a lot easier to flex upwards from there if needed. So again, that's how I structure the LTA from our perspective. I'm not sure how CNH looks at it, but I think we're -- they're looking at it in a similar perspective.

Got it. That's helpful. And then second question, just given the strength of the business recently and the positive trends persisting in the near term. Is there any major CapEx or sort of CapEx projects or other uses of cash that you could expect?

We're working under a multiyear, call it, cycle of investments that we need to make within our facilities and our plans for capacity, for efficiency and productivity across the plants as well. And so I feel pretty comfortable that we can maintain the kind of range that we're in with the programs that we have in place. We can flex up or down based on some opportunities that we see for the market. But from a pure CapEx standpoint, we're in a good place.

Got it. And last one, maybe just following the divestiture of the Australian wheel business. Are there any other businesses that could be considered noncore? Anything that you're sort of thinking through just again, especially since performance is so robust in the core businesses?

Yes. I mean we've talked in the past about our tire recycling business. We've done a good job with that business as far as we can take it. That is something that I do believe there could be some opportunities to either partner or divest to that business, especially as there's momentum growing in the recycled carbon black arena, and there's more and more players that are looking to get into that sector. So I think that's something we would be looking down the road.

So again, it may be not a full divestiture but at least a partnership to help get that business on -- for us, I guess, help get that business more involved with the environmental-friendly landscape that it can really provide to the right customer base. We just aren't the right person to be able to utilize that full capacity they have up there into our production. So I think a partnership would be really good where again, it's a very environmental-friendly process and with the right partner, I think that could do a lot of good for the industry. But at this point, probably the only thing that I would say is still on the table as a potential divestiture.

Got it. And do the challenges in Russia and sort of the higher carbon black cost changed the sort of fundamentals or growth prospects of that business, just given everything that's happening?

Well, I think as there is inflation, I would agree with your comment because one of the challenges we've had, we get into the proper position within the market is just the cost of virgin carbon black compared to the cost of processing recycled carbon black. So, I do think it's the way of the future. And again, there's been a couple of announcements in the last few months that are positive in that direction.

And I think Komal it's a good point you bring up. It's partly being driven by the fact that the virgin carbon black is going up in price, which gives you more room to bring that into the market at a reasonable price. And I do think it will happen. I do think it will move in that direction. And certainly, we want to be a part of it with what we got up at TTRC, but we will kind of tell which direction that ultimately goes.

Our final question goes to Kirk Ludtke of Imperial Capital.

Congratulations on the quarter. Just a couple of follow-ups. One topic would be steps that you're taking to -- while the environment is strong, steps you're taking to improve the business through the cycle. That's one topic. And then the other is capital allocation. With respect to the improving the business, do the commercial arrangements that you're pursuing, do they provide any kind of floor on volumes when the industry receives?

Yes. Kirk, that's a good question. So on improving our business, I'll start with that last piece you just highlighted. Going back to what I said earlier, that's where we approach these LTAs from a win-win perspective, where we get that consistency, which is really a floor in volumes. Again, as we bring in a workforce, they're highly skilled. We get them trained. We need to have that consistency. So those LTAs are very important for us from that perspective. But it also just strengthens that relationship with them, with our customers, our large customers from a risk mitigation perspective. So I think the landscape over the last 2 years has tightened has proven throughout the cycle that we're in, that we could be there as a trusted partner and the value proposition of the products that we produce. We work hard to do it efficiently. We put leading-edge technology into the marketplace, and we focus hard on producing quality products.

So with all the investments that we put into our business, that risk mitigation that we bring to the marketplace, I think is the value that is being reflected in these LTAs as well. And obviously, as globalization becomes regionalization, I do think Titan is very well positioned with our plants, our production capabilities to be there to serve our customers. And again, those LTAs are a reflection of it.

So to answer your question, yes, we do look to pursue that consistency through floors and volume commitments. But then that also gives you the upside to overproduce or increase -- no, overproduce is a wrong word, but increased production well above those floors that are in that agreement as well. And as far as the business improvements, going back to the first part of your question, and then I'll turn it over to David for the second one.

I really look at what's going on at Titan is a reflection of what our team has accomplished and what we're capable of doing, and we've seen that over the last couple of years. But I also want to just make sure that it's clear, it's deeper than that. We didn't just wake up in January of 2022, and all these things has fell into place. We've been working hard to make a lot of structural changes to the company and pretty much all facets of the business. And I give all of us credit for doing that. It's been hard. We've been in some down cycles and -- but during those down cycles, we kept improving and we kept improving in very significant ways. And it's great to see it all come together. And I do think what we posted here in 2022, what we accomplished in '21 is really -- and the updated guidance we provided for this year, again, is a reflection of a multiyear effort and not something that is just, again, something that just happened quickly and abruptly. So I want to give the entire team credit for what we've accomplished over many years to put us in a position where we are today.

Yes. And the second part of your question was regarding capital allocation. I don't know if -- let me try to take a stab at what you're after there. Nothing's really changed with respect to the comments that we made last quarter. We believe the improved cash flow, the leverage point that we sit at today, we're in a much better position. And all of this gives us the optionality, the flexibility to look after growth initiatives that we have in the company, investments we need to make in the business and ultimately providing the best return to shareholders as we possibly can as well as all of our constituents.

And so we're in a really good position, and we'll continue to maintain the conservative posture that we have on leverage, and we believe we have some good options in front of us. And we will take all those opportunities in lockstep with our Board and make the right decisions for everybody.

Great. I appreciate it. Could you remind us what the -- what you're authorized to buy back?

Well, in terms of the share buyback?

Yes, I'm sorry.

Yes. We had an authorization from the Board a couple of years ago that we put in place. It was $25 million.

So you've exhausted that in the first quarter?

Well, that was a special authorization for that specific purpose that was authorized by the Board. So that $25 million remains outstanding as far as an authorization.

You could buy back another $25 million. Okay.

That concludes our Q&A session. So it's my pleasure to turn the call back over to Mr. Reitz for closing remarks.

Well, I appreciate everybody's participation in our Q1 call today and look forward to touching base with you in our second quarter results. Take care. Have a good day.

That concludes the Titan International, Inc. First Quarter 2022 Earnings Call and Webcast. Thank you all for your participation. You may now disconnect your lines.