NN, Inc. (NNBR) Q4 2021 Earnings Report, Transcript and Summary

Good day, and welcome to the NN, Incorporated Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jeff Tryka. Please go ahead.

Thank you, Jason. Good morning, everyone and thanks for joining us. I'm Jeff Tryka, Investor Relations contact for NN, Inc., and I'd like to thank you for attending today's business update. Yesterday afternoon, we issued a press release announcing our financial results for the fourth quarter and full year ended December 31, 2021 as well as a supplemental presentation, which have been posted on the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Lambert at 315-529-2348. Our presenters on the call this morning will be Warren Veltman, President and Chief Executive Officer; and Mike Felcher, Senior Vice President and Chief Financial Officer. Before we begin, I'd ask you that take notice of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation and in the Risk Factors section in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and when filed the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The same language applies to comments made on today's conference call, including the Q&A Session as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, input cost inflation, supply chain constraints, the impact of the automotive semiconductor chip shortage, foreign exchange rates, cash flow, tax rates, acquisitions, synergies, cash and cost savings, future operating results, performance of our worldwide markets, the impacts of the corona virus or COVID-19 pandemic, and the Russia Ukrainian conflict and the company’s financial conditions and other topics. These statements should be used with caution, and are subject to various risks and uncertainties, many of which are outside of the Company's control. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and the supplemental presentation. Reviewing the agenda for today's call, Warren will provide a business update from the fourth quarter and full year. Then Mike will provide a detailed update of the financial results before turning the call back over to Warren to discuss our segment results and markets, as well as the outlook for the 2022 fiscal year. There will be a Q&A Session following the conclusion of the prepared remarks. At this time, I will turn the call over to Warren Veltman, President and CEO. Warren?

Thanks, Jeff, and good morning, everyone. If you would turn to Page 5, we will review some of the highlights and accomplishments of our team over the past year and touch on recent events that have occurred at the start of 2022. Let's start with our strategic objectives of growing the business around ICE Independent applications including electric vehicles and the expansion of the electric grid. Our first objective was to substantially expand the number of opportunities that we were pursuing. On that front we were successful. During 2021, our pipeline for the Mobile Solutions group increased 22% year-over-year, while Power Solutions pipeline increased 161%. The mix of our pipeline also continues to shift towards applications consistent with our strategic objectives. As indicated here and graphically on the next page, NN's overall pipeline is approximately 80% concentrated on applications independent of the gasoline internal combustion engine. Likewise, our 2021 new business wins, which totaled over $50 million, only 13% were on ICE dependent applications. As we have discussed previously, our Power Solutions sales team was restructured during 2021 and we further strengthen the NN sales team with the January 2022 appointment of Andrew Wall as our Chief Commercial Officer. Andrew brings strong leadership and 20 years of experience with extensive sales, marketing and operations background in the power and industrial solutions space to NN. With these actions, I believe our sales teams are well-positioned to capitalize on growth opportunities, and our targeted growth areas of electric vehicles and the expansion and modernization of the electrical grid. Regarding 2021, we started the year with rapidly rebounding markets and demand returning to more normalized levels following the impact of COVID during 2020. The favorability resulted in solid year-over-year growth in revenues and profitability during the first half of 2021. As we entered the second half of the year, we saw an increase in supply chain challenges affecting our business and that of our customers. Most notable was the semiconductor chips shortage that significantly impacted the automotive industry during the third and the fourth quarters, causing production disruptions at our customers which rippled through the supply chain. We increased safety stock levels on critical material and tooling and finished good components in an effort to protect our ability to supply our customers. While these efforts use cash to increase inventory, we utilize customer programs to improve receivable terms and an attractive cost to mitigate the overall working capital impact. To combat the inflation pressures mounting in the second half of 2021, we have negotiated or enacted price increases to recover or mitigate material and labor inflation. Further, we have improved our position on recovering future material price increases by negotiating 100% material price pass-through with the majority of our customers. We balanced the short-term impacts of timing between cost increases and pricing recovery with a long-term partnership we have with our customers to reach the right solution for each of us. Subsequent to year-end, we took action to improve our operating margins and cash flow as we announced the closure of our Taunton, Massachusetts facility. This action will have the impact of reducing costs through the rationalization of our AD&M manufacturing footprint. While 2021 presented several challenges with inflation and the extremely contagious Omicron COVID variant disrupting our production facilities and disruptions to the global supply chain, the dedication and hard work of our employees allowed us to meet and deliver against customer expectations and position us to generate strong financial performance in the future. With effective management of working capital, we were able to generate $11.6 million of free cash flow before payments of $14.2 million related to the sale of Life Sciences, CARES Act FICA deferral repayments, litigation costs and severance. During the first quarter of 2021, we successfully completed our $265 million refinancing which strengthened our balance sheet and provided us with long-term financial stability to reach our 2025 growth objective. The refinancing included $150 million term note, $65 million in preferred equity and a $50 million ABL which reduced our borrowing costs from approximately 15% down to approximately 12%. Recently, we also proactively amended leverage ratio requirements of our term loan agreement to maintain adequate flexibility given the uncertain and challenging macroeconomic climate. Also, during the first half of 2021, we enhanced our Board with the appointment of three directors whose expertise aligns with our strategic growth focus areas. The addition of these board members has provided valuable insights into some of the key mega trends in the auto and electrical industries that are influencing our overall business today. We also strengthened our executive leadership team by adding two new members during the year. Mike Felcher was promoted from Chief Accounting Officer to CFO, and as I mentioned previously, Andrew Wall joined us in January as our Chief Commercial Officer, a new executive position to help NN achieve its growth objectives. Lastly, we are enhancing our proactive communications and investor outreach in 2022. We are planning to host a Virtual Investor Day in May, which will feature a range of presentations and Q&A sessions from our leadership team and highlight our strategic vision in the many ways we differentiate ourselves from our customers. We will be launching a new website in the second quarter that will better reflect who we are as a company. We are also fully engaged in the development of our first corporate sustainability report and plan to make environmental, social and governance key topics of focus in our external communications. As we flip to Page 6, you can see the graphics showing our pipeline and new business wins that I previously discussed. We are excited about our electric vehicle pipeline expanding over 8x in the past year. You will know that we are all -- we are still accepting Business Awards for gasoline ICE Independent -- excuse me, gasoline ICE Dependent applications. Typically, those programs will utilize existing capacity in our business, thus requiring low -- lower levels of CapEx, or are being priced to generate higher-than-normal return on invested capital. Now I'd like to turn it over to Mike Felcher, so he can provide a more in-depth review of our financial performance for the quarter. Mike?

Thanks, Warren. Turning the Page 7, we have summarized some of the key items for the quarter. Sales for the quarter were $110.4 million, down 7.3% from a year ago. We saw continued improvement in our residential and commercial electric end market within our Power Solutions group, resulting in year-over-year revenue growth of 1.8% for the segment. This growth was more than offset by a 12.6% decrease in revenues in the Mobile Solutions business due to supply chain challenges, which were most acute in the automotive sector were the ongoing semiconductor chip shortage affected production globally. As OEMs shut production lines, this directly impacted our Tier 1 supplier customers, which in turn affected our production. To help mitigate these supply chain disruptions and constraints on materials, we work throughout the quarter to remain flexible, while continuing to work together with our customers and vendors to ensure we have adequate inventory to maintain production and meet our customer needs. Throughout the second half of 2021, we experienced significant material and labor inflation, which impacted our margins. In response to these cost increases, we implemented price increases in the Power Solutions business in 2021, which we anticipate will recover the inflationary impact along with margin. In Mobile Solutions, we implemented price increases in the first quarter of 2022 with a focus on recovering material cost inflation and where appropriate, the impact of lower volumes on fixed manufacturing costs. Lastly, our profitability in the fourth quarter continued to be impacted by the reinstatement of a number of programs that were temporarily suspended in 2020 in response to COVID. Non-GAAP adjusted EBITDA for the fourth quarter was $12.1 million or 10.9% of sales, down from $16.8 million a year ago when adjusted EBITDA was 14.2% of sales. Profitability was adversely impacted by material and labor cost inflation that accelerated in the second half of the year, the impact that the Omicron variant and customer ordering patterns had on our U.S manufacturing efficiencies, as well as the reintroduction of costs that were temporarily suspended in the prior year. GAAP EPS from continuing operations was a loss of $0.07 for the fourth quarter versus a loss of $0.44 per share in the fourth quarter of 2020. Our current quarter results reflect a $2.3 million increase in other income related primarily to warrant revaluation and a $1 million increase in our share of income from our China joint venture, partially offset by higher interest expense of $1.6 million. The fourth quarter of 2020 included a loss of $14.8 million related to the discontinuation of hedge accounting on an interest rate swap. Our adjusted diluted EPS from continuing operations was a loss of $0.01 per share versus a profit of $0.17 per share in the prior year. Moving to Slide 8, we will review -- view full year results. Overall, our results significantly improved year-over-year as the economy and our business recovered from the impact of the COVID pandemic in 2020. Sales increased 11.7% to $477.6 million with growth fairly balanced between Mobile Solutions and Power Solutions. GAAP operating loss improved to a loss of $9 million from a loss of $117.5 million in the prior year, which included a $92.9 million impairment of goodwill in Power Solutions. Non-GAAP adjusted operating income increased to $10.1 million from $7.8 million, while adjusted EBITDA increased 12.1% to $52.1 million from $46.5 million. GAAP diluted EPS from continuing operations improved to a loss of $0.82 per share from a loss of $3.60 per share in 2020. Non-GAAP adjusted diluted EPS improved a profit of $0.04 per share from a loss of $0.16 per share last year. Turning to Slide 9, we saw a sequential decrease in working capital turns in the fourth quarter, as inventory remained above normal levels due to safety stock needed to address increased lead times due to the ongoing semiconductor shortages as well as other supply chain issues. The carrying amount of our inventory has also increased due to material inflation we have experienced. We are focused on returning the normal inventory levels as the supply chain stabilizes which will result in improved turns and cash flow. Net working capital remain flat to the prior year at $109.7 million. As noted previously, we were able to offset the increase in inventory in 2021 with lower accounts receivable. This was due to lower fourth quarter sales compared to last year as well as utilizing customer programs to improve receivable terms. Working capital turns where 4.0 turns versus 4.3 turns in the prior year as a result of the lower sales level during the fourth quarter of 2021 compared to the prior year. Turning to Slide 10, we highlight our disciplined approach we have taken to capital expenditures over the past year as we prudently manage our cash in the current operating environment, while continuing to fund investments in our long-term growth. You can see on an absolute basis, we have increased CapEx compared to 2020, but reduced expenditures from $11 million in the first half of the year to $7.2 million in the second half. Slide 11 shows a chart of our free cash flow for the quarter. Free cash flow was an inflow of $6.2 million in the fourth quarter 2021 compared to a use of $7.1 million in the prior year, which included $14.3 million of transaction costs related to the Life Sciences sale. Free cash flow for the full year included cash generation of $11.6 million before payments of $14.2 million related to the sale of Life Sciences, CARES Act, FICA deferral repayment, litigation and severance costs, resulting in free cash flow being at use of $2.6 million for the year. We had also previously expected receipt of our CARES Act tax refund this year, which we now anticipate in 2022. Please turn to Slide 12. Net debt at the end of the fourth quarter was $134.0 million versus $46.9 million in the prior year, an increase of $87.1 million. The year-over-year increase was due to the refinancing completed earlier in the year, which better positions our balance sheet to achieve our 2025 growth objectives. Our net debt to adjusted EBITDA ratio stood at 2.57x at the end of the fourth quarter, up from 1.01x a year ago. We had $64.7 million of liquidity including cash and availability on a revolver as of December 31, 2021, which was an increase of $3.6 million from Q3 2021. With that, I will turn it back to Warren.

Thanks, Mike. On Page 14, we broadly outline our view of current market conditions within each of our main markets. Within automotive, the transition to EVs continues to gather strength with significant OEM investment. A report by Reuters, on November 10 2021, noted that Global automakers are planning to invest an estimated $515 billion in electric vehicles and batteries through 2030. We are well-positioned to supply product through both our Mobile and Power Solutions groups. The semiconductor chips shortage has impacted global auto and light truck production, resulting in continued uncertainty for the industry over the near-term. These supply chain issues directly contributed to a 14% decrease in light vehicle production in the fourth quarter of 2021, compared to the fourth quarter of 2020. Despite these ongoing concerns, we have seen some improvement in the outlook as 2021 global production came in at 76.2 million units compared with the previous forecast of 75.8 million. The LMC global production outlook for 2022 was revised upward by 3.2 million units, or 3.9% to approximately 85.8 million units. Within the electrical space, we see long-term demand drivers as public and private grid operators prepare for new emerging technologies needed under the smart grid, as well as the transition to green energy. We see increasing demand for power transmission and storage infrastructure to tie grid energy sources to green power generation, such as wind and solar. In addition, we believe that increased adoption of electric vehicles for private and commercial use will benefit our power solutions business through increased content per vehicle opportunities and charging infrastructure demand. Green initiatives have been the focus of the current administration in Congress, and significant investment in technology and power infrastructure were included in the infrastructure bill passed last year. While the pace of conversion may be uncertain, the long-term shift towards green energy will increase significantly as a share of power generation driven by billions of infrastructure spending. Ultimately, these mega trends driving the market are aligned with our 2025 transformational growth initiatives. We have presented additional information for each of our operating groups starting with Mobile Solutions on Page 15. Mobile Solution sales fell in the fourth quarter from 1-year ago as the ongoing semiconductor chips shortage in the automotive industry caused the loss of approximately 2 million production units in the fourth quarter versus 3.3 million units in the third. The lower profitability was driven by reduced sales volumes, the implementation of certain costs suspended in the prior year, inflationary pressures and operating inefficiencies caused by labor availability and the impact of COVID. Looking forward, we expect demand to remain soft in the first quarter as the semiconductor chip shortage continues to impact a broad range of our customers. We were able to successfully pass-through most material cost increases to customers through pricing actions taken in the first quarter, and have also in certain instances negotiated pricing for lost contribution due to below contract volume. On Page 16, our Power Solutions group experienced a year-over-year increase in sales in the fourth quarter, which was driven by a recovery in demand to pre-pandemic levels in the electrical market, and increases in precious metals, partially offset by reduction in automotive sales. Profitability in Power Solutions was adversely impacted by lower margins in our AD&M business and the resumption of certain costs suspended in the prior year. In addition, profitability was also impacted adversely by inefficient -- inefficiencies associated with unfavorable mix shifts, supply chain disruptions, uneven customer ordering patterns and label -- labor constraints caused by pandemic interruptions. Looking forward, we see improving demand trends in Power Solutions driven by market growth and increased volumes associated with new business wins. We have been successful in passing through inflationary cost impacts to customers, which will be reflected in our results going forward. We'll remain protective of cash flow in the segment through prudent working capital and CapEx management. Turning to Page 17 for our outlook and guidance for 2022. For the year, we are anticipating new sales to increase -- net sales to increase between 8% and 13% from 2021, resulting in a net sales range of $515 million to $540 million. Regarding the semiconductor shortages that have been affecting our business and that of our customers, we anticipate that the shortage will remain a headwind through the first half of the year with recovery in the second half of the year. Our guidance does not anticipate production disruptions due to COVID-19 beyond the first quarter, nor does it reflect any disruptions that may arise due to the Russia and Ukraine conflict. We expect that the majority of our pricing actions will be implemented during the first quarter. Based on these assumptions, we expect to generate adjusted EBITDA in the range of $57 million to $63 million for the full year, an increase of 9% to 21%. With the pricing increases implemented or expected to be implemented, we believe we have positioned the company to recover the vast majority of historical and future material cost inflation. Labor costs have been partially recovered due to the customer expectation of year-over-year productivity improvements. If inflation escalates significantly above current levels, it would likely require additional pricing action with customers. In addition, we expect to implement deferred investments in indirect headcount in the second half of the year, contingent on the resolution of supply chain disruptions, and a return to more normal volumes. In terms of EBITDA, we expect that the Taunton facility adjusted EBITDA improves $2.5 million from a loss of $5 million in 2021 as the facility readies for closure in late 2022. Beginning in 2023, we expect a run rate savings of $5 million annually. Turning to free cash flow, we expect to generate between $14 million and $20 million for the full year. You can see some of the main inputs in our free cash flow guidance for the year on this slide. I would also note that our guidance does not include the expected CARES Act tax refund of approximately $10 million due to the uncertainty of the timing. In summary, we accomplished several key initiatives during 2021, including establishing a pipeline of strategic opportunities to drive future sales and a financial foundation with our balance sheet to support our long-term growth. We strengthened our leadership team to include a new CFO and a new CTO that will help drive our long-term success. We still have challenges and uncertainties ahead of us, but we will continue to navigate the current environment with the flexibility and responsiveness to improve our operations and meet the current and future needs of our customers, which will drive our future success. That concludes our prepared remarks. And I will now turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Steve Barger from KeyBanc Capital Markets. Please go ahead.

Good morning, guys.

Good morning, Steve.

Good morning.

The midpoint of revenue guidance is about a 10% increase. How much of that is in backlog or you have firm line of sight versus expected relative to these EV and power grid opportunities? I'm just trying to get a sense for this business increase versus conquest revenue gains.

Yes, sure. Steve, let me let me speak about the Group's separately, okay.

Yes.

So, in the -- on the automotive side or the Mobile Solutions side, the concept of backlog is not one that we spend a lot of time on. So, when we think about the forecast for that Group, it really is being driven by business that exists today that we have been awarded, okay? So given that we've talked about the lead times for business development being 18 months, sometimes greater, so when we look at our guidance for 2022, it's really on the Mobile side it relates to programs that we're relatively certain that we're -- that we've been awarded or we have been awarded and is contracted. The only uncertainty could come as it relates to macroeconomic conditions that would drive automotive production volumes and programs that we have been awarded what is the start date of those, the scheduled start up production date, if that were to slip or be accelerated that could change the timing of it. On the Power Solutions side, a lot of our historical business is carrying over and growing. There is some expectation that we're going to grow that business organically through market gains. But I would tell you, it's not a significant portion of what we're projecting from a guidance standpoint.

Got it. So really what does it mean to have 161% increase in the power pipeline? Is that the year-over-year change identified opportunities or customer requests for quote, or actual quotes you have out in the marketplace?

Yes, it's all of those things. And what it really says, to me, as a leader of this organization, is that the plans that we've put in place on the sales side for the Power Solutions group are taking hold. We redid from a personnel standpoint the majority of that group in early 2021. We replaced the leadership and that team has done a really solid job of pursuing new opportunities that fit our objectives in the marketplace. So, to see that pipeline of opportunities, and in most cases, it's business that we have quoted on, or we're engaged with the prospective customer to receive a Business Award. But it hasn't been awarded yet, and that's why it's in the pipeline.

And I know this is a hard question, but how are you thinking about likely conversion rates?

Yes, so when we look at the pipeline on the Mobile Solutions side, I would tell you, there's two factors that go into that. One is, how strategic is it to what we want to do and how hard that we want to pursue it. I think if you look at it on an overall basis, our hit rate normally might be in the 15% to 20% rate. But something that we've targeted, and we've really sharpened our pencils from an engineering standpoint on how we would process the job that really fits with our goals, our hit rates may be higher, in all likelihood they are. And on the Power side, I would tell you, the data population surrounding that is being developed. We've had some pretty solid hit rates recently, but given the expansion in the pipeline, our hit rate probability could go down, given the amount of projects that we've added that we're pursuing. And we need to be diligent. Some of these -- I have to tell you, some of these programs have some capital associated with them. There's -- and as we've looked on the Power side, specifically, we've moved our -- we've shifted our objectives certainly from what we've had pursued in the past, which were smaller programs. There's similar big [indiscernible] going on here than what we've done in the past to secure some programs that have some more size to them, and some more consistency as it relates to volumes. When you look at that business, we have really a couple major customers that we have long-term contracts with, the rest of it is repetitive business through annual purchase orders, that type of thing. And what we'd like to do is shift some of the business dynamics for our Power group to include some larger programs that are multiple year contracts where we become a more strategic part of our customer supply chain.

Understood. And last one for me, I -- first I will just say congratulations on negotiating the material cost pass-throughs. I know that's been a big headwind in the past. Are you confident in -- use the term sharpening your pencils that the things that you have, the quotes you have out in the marketplace are going to come through at better contribution margins than where you've been running in the past?

I think that is subject to ongoing evaluation. But I would tell you -- I talked a little bit about the gasoline internal combustion engine product that still is in our pipeline. That in our view, to the extent that would require any additional CapEx on our part, we would expect that the margins on that business going forward would be greater than what we've had normally. I would tell you, the other thing that we're seeing in the marketplace today is on some of these larger programs that we are quoting. There is demand for multiple processes. What I mean by that is historically, we would have the Mobile group called precision turned components, right. And now customers are coming to us with programs that require deep draw stamping, along with some components that are precision turned or ground along with the need for plastic injection molding. So, it gives us an opportunity to really differentiate ourselves with our customers. And that I believe can lead to some margin expansion over the long-term.

That's great. Thanks.

[Operator Instructions] The next question comes from Rob Brown from Lake Street Capital Markets. Please go ahead.

Good morning.

Good morning, Rob.

Good morning.

First question is on the EV pipeline, a nice expansion there. Maybe could you give us a sense of what [indiscernible] expansion? Is it the -- just the growth in the EV market? Or is there a greater content per vehicle that you're able to provide?

Yes, I think it's a combination of things, Robert. Certainly, you've seen the OEMs and we talked about this briefly, have pulled forward in a -- significantly expanded the number of electric vehicle offerings. That's number one. Number two, our sales group has a more defined goal set and objective on what we're pursuing strategically. We spent a lot of time on that over the last year, and certainly with Andrew coming on, we're refining that even further. And lastly, I would say that, as we've continued to explore the opportunities with our customers, there's the opportunities to increase the content that NN provides on cars today, has gone up from what our original expectations are. And it's -- example -- I'll give you an example. We've been working with a customer on a braking system application for an electric vehicle that requires because there's no brake booster in the assembly, that can be driven by the power of the engine, there's a lot more sensors that are required on that braking application, which requires more precision parts than we previously had understood, which has given us a great opportunity to work with a customer on that, okay? There's other opportunities that we've discovered, that our plastic injection molding facility can provide. And that's why as I indicated earlier, NN is really uniquely positioned in the market today to deliver to some of these large multinational companies that are pursuing new applications on the electric vehicle side, because we can service them in all these areas, whether it be grinding, turning, plastic injection molding, or precision progressive stamping, we have all those capabilities under our roof, which is really unique for some of the suppliers that they deal with.

Okay, great. Thanks for that overview. And then on the pricing that you're instituting, can you give us a range or sense of what that pricing kind of on average is that price increase?

Yes. And I'm going to caution you first on this, that as you evaluate the number against our total sales, you need to remember that the company already had systems and processes in place to capture price increases for material, okay, where we would have a material share arrangement with a customer, whether it be 70-30 or 80-20, right. So, material coverage that we already had in our contractual arrangements with customers is not in the number that we're talking about. But I would tell you, in a large bucket, some of the pricing that we've looked at globally, throughout NN is approaching about $20 million at this point in time. And when you think about where we are globally, if you look at the Brazil economy as an example, with the inflation characteristics down there, we've been able to pass-through price increases to our customers in Brazil in the 9%, and up range, okay. Some of our other low -- our other geographies, the inflation dynamics might not -- certainly are not as high as they are in Brazil. But we've been -- to me, the key is that we've been successful on the material side agreeing with our customers that NN really can't bear given how materials moved. We can't bear the risk, even of 20% of that price increase. So, we've been able to get the majority of our customers to agree to take on more of that cost increase by going to 100%. We still have in all frankness, we still have situations with customers where they're -- we're still in negotiation, because they're not willing to accept some of that risk. So, there have been situations where we've had to play -- take a harder stance in the negotiation, in order to reach some sort of compromise or conclusion there. But I've used the word majority and I think that that's an accurate statement that in the majority of instances, we've got our customers to take 100% of the risk on the material side. I think that's a big step.

Okay, great to hear that. And my last question, it's a little harder maybe to answer, but in terms of your outlook in the visibility, how do you sort of feel about visibility now compared to a quarter ago, in terms of the end markets and the customers demand profiles and things [indiscernible], but how has it changed over the last couple months?

Yes, I think -- we've seen the up and downs of COVID, right. So, we're cautious when we say this that our -- as we said, our guidance for the full year assumes that we're not going to have significant interruption from COVID going forward after the first quarter. And just to give you an idea, our operations in North America as an example, on the Mobile side, 74% of the absenteeism that we experienced in 2021 occurred in the fourth quarter when Omicron became prevalent, especially in our Western Michigan facilities. So that was a pretty extreme hardship on that team to manage through that. And they did a great job, in all honesty. So, we think we have -- we think we're cautiously optimistic that some of that is behind us. We've spent a lot of time evaluating and looking at the semiconductor chip issue. That would be the other one that's on the table. And then lastly, would be the Ukrainian and Russian conflict. And that one is relatively new. I said in my prepared remarks that LMC was projecting, I think it was at 85.8 million in production this year. But just yesterday, we received an alert, as it relates to a revision of that number down into the high 83s, I think they took it down 1,000,002 or 1,000,004 because of disruptions in OEM production in Europe because some of the component tree for the European OEMs was coming out of Ukraine, or that area, which was causing them some difficulty. So there still are some things that are moving around on us. But it is certainly I would tell you a little clear for us today than it was a year ago. And that's why we wanted to step forward and provide some guidance, because this is what we think the business is capable of doing. This is our view of it today. And we wanted to make sure that our investors, our shareholders, and our analysts understood our view going out through 2021. But certainly, there's still some uncertainty.

Great, thank you. I'll turn it over.

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Warren Veltman, for any closing remarks.

Thank you, operator. I just like to thank everybody for taking the time to listen to our earnings call this morning. Certainly, appreciate it -- appreciate the support and the interest that everyone's had, certainly throughout 2021. And as I said in my concluding remarks, I think the team here has done a fine job of riding the ship that was NN and positioning this company to be extremely successful, and really converting our management efforts now into full growth mode in order to provide ongoing value. So, appreciate everybody's time today. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.