"We were able to pick up right where we left off in 2021 with another stellar quarter to begin the year," stated Paul Reitz, president and chief executive officer. "All of our business units across all geographies came together to deliver our strongest sales quarter in nearly 9 years.
"Earlier this year, we commented on the positive market dynamics creating a tidal wave for Titan to navigate in 2022 and beyond. We continue to firmly believe this remains the case. Our first quarter results and our 2022 order books clearly support that, along with elevated commodity prices with solid supply-demand fundamentals, used inventory levels at record lows for larger equipment and demand for new equipment that remains robust.
"Based on the strength of our first quarter performance and a similar expectation for Q2, we are now anticipating full year net sales above $2.1 billion, with adjusted EBITDA to be around $200 million. This revised outlook reflects more normalized demand and production levels in the second half that are in line with our typical seasonality trends for the business. Based on the increased profitability and strength in the business, our cash flow expectations have also improved, and believe we can deliver between $55 million and $65 million in free cash flow for the full year.
Results of Operations
Net sales for the first quarter ended March 31, 2022, were $556 million, compared to $403.5 million in the comparable quarter of 2021, an increase of 37.8%. The net sales increase was across all segments and driven by price/product mix and volume, with price having a greater impact due to rising raw material costs and other inflationary impacts in the markets, including freight. The contributing factors to the increase in demand were increased commodity prices, improved farmer income, replacement of an aging large equipment fleet, and lower equipment inventory levels. The increase in net sales was offset by unfavorable foreign currency translation of 4.4 percent or $17.7 million.
Gross profit for the first quarter ended March 31, 2022 was $86.7 million, compared to $53.3 million in the comparable prior year period. Gross margin was 15.6% of net sales for the quarter, compared to 13.2% of net sales in the comparable prior year period. The increase in gross profit and margin was driven by the impact of increases in net sales, as described previously, primarily reflective of productivity improvements across all production facilities. In addition, cost reduction and production initiatives continue to be executed across global production facilities.
Income from operations for the first quarter of 2022 was $44.7 million, or 8% of net sales, compared to an income of $14.2 million, or 3.5% of net sales, for the first quarter of 2021. The increase in income was primarily due to the higher sales and improvements in gross profit margins.
During the quarter ended March 31, 2022, net sales increased 48% driven by price/product mix and volume due to significant demand increases in the global agricultural market, reflective of improved farm commodity prices and increased farmer income, the need for replacement of an aging large equipment fleet and the need to replenish equipment inventory levels within the equipment dealer channels. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight.
The increase in gross profit and margin is primarily attributable to the impact of increases in net sales as described previously and cost reduction and productivity initiatives executed across global production facilities. The Company balanced the increases of related raw materials and other inflationary cost impacts with corresponding price increases to protect profitability.
Effects From CNH/UAW Strike
When asked about the effects the ongoing strike by UAW CNH Industrial workers would have on Titan following the announcement of its long-term agreement with CNHI in March, Reitz stated he was confident in CNHI's leadership and wasn't concerned about adjusting production schedules.
"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. At this point I don't see us adjusting our production schedules 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 two, but if needed, we can adjust. I don't see that having a significant impact from how we continue to operate day-to-day."
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