• Preliminary Full Year Fiscal 2015 Revenue of $1.9 Billion
• Generates Approximately $82 Million Adjusted Cash Flow from Operations in Full Year Fiscal 2015
• Recognizes Non-Cash Intangible Impairment Charges in the Fourth Quarter
• Company Implements Realignment Plan in First Quarter of Fiscal 2016 

WEST FARGO, N.D. — Titan Machinery Inc. today reported preliminary financial results for the fiscal fourth quarter and full year ended Jan. 31, 2015.

Preliminary Fiscal 2015 Fourth Quarter Results

For the fourth quarter of fiscal 2015, revenue is expected to be approximately $491 million compared to revenue of $708.6 million in the fourth quarter last year.

The company is recognizing non-cash impairment charges of approximately $31 million in the fourth quarter of fiscal 2015, primarily related to goodwill and other intangible assets within the Agriculture segment.

Pre-tax loss for the fourth quarter of fiscal 2015 is expected to be approximately $37 million. Excluding the aforementioned non-cash impairment charges, realignment costs of $0.5 million and Ukraine currency devaluation of $0.8 million, adjusted pre-tax loss for the fourth quarter of fiscal 2015 is expected to be approximately $5 million. This compares to pre-tax income of $2.8 million in the fourth quarter last year, which included a $10.0 million non-cash impairment charge; fourth quarter of fiscal 2014 adjusted pre-tax income was $12.8 million. Adjusted pre-tax Agriculture segment income is expected to be approximately $2 million for the fourth quarter of fiscal 2015, compared to pre-tax income of $25.1 million in the fourth quarter last year. Adjusted pre-tax Construction segment loss is expected to be approximately $5 million for the fourth quarter of fiscal 2015, compared to adjusted pre-tax loss of $8.2 million in the fourth quarter last year. Adjusted pre-tax International segment loss is expected to be approximately $3 million for the fourth quarter of fiscal 2015, compared to adjusted pre-tax loss of $2.3 million in the fourth quarter last year.

Net loss attributable to common stockholders for the fourth quarter of fiscal 2015 is expected to be in the range of $26.3 million to $27.4 million, or $1.25 to $1.30 per diluted share. This net loss includes the non-GAAP adjustments totaling approximately $22.6 million (or $1.07 per diluted share). Excluding these non-GAAP items, adjusted net loss attributable to common stockholders for the fourth quarter of fiscal 2015 is expected to be in the range of $3.7 million to $4.8 million, or $0.18 to $0.23 per diluted share. For the fourth quarter of fiscal 2014, net loss attributable to common stockholders was $0.4 million, or a loss per diluted share of $0.02. Excluding non-GAAP items totaling $7.8 million (or $0.37 per share) related to impairment and income tax valuation allowance on certain deferred tax assets of its International dealerships, adjusted net income attributable to common stockholders for the fourth quarter of fiscal 2014 was $7.4 million, or $0.35 per diluted share.

Balance Sheet and Cash Flow

The Company ended the fourth quarter of fiscal 2015 with cash of approximately $128 million, which is an increase of approximately $54 million over the cash balance of $74.2 million as of January 31, 2014. The Company’s inventory level decreased to approximately $879 million as of January 31, 2015, compared to $1.08 billion as of Jan. 31, 2014. This includes a $168 million reduction in equipment inventory. The Company had $629 million outstanding floorplan payables on $1.2 billion total discretionary floorplan lines of credit as of January 31, 2015. Floorplan payables decreased by approximately $122 million over the balance of $750.5 million as of Jan. 31, 2014.

For the fiscal year ended January 31, 2015, the Company’s net cash provided by operating activities is expected to be approximately $41 million on a GAAP basis. The Company evaluates its cash flow from operating activities net of all floorplan payable activity. Taking this adjustment into account, adjusted net cash provided by operating activities is expected to be approximately $82 million for the fiscal year ended Jan. 31, 2015.

The Company is working with the lenders in its bank syndicate with respect to its expected noncompliance with the current minimum income before income tax covenant as of the end of its Jan. 31, 2015 fiscal year. The Company anticipates amending this covenant associated with this credit facility effective as of the end of its Jan. 31, 2015 fiscal year and for future periods, and therefore does not anticipate being in violation of any covenants as of Jan. 31, 2015. The Company’s successful working capital management during fiscal 2015 provided strong balance sheet metrics as of Jan. 31, 2015, including a $54 million increased cash balance, increased availability under other existing credit facilities, and reduced level of financial leverage, as evidenced by improvement in the Company’s total liabilities to tangible net worth ratio from 3.1 as of Jan. 31, 2014 to 2.6 as of Jan. 31, 2015. Moreover, the Company believes its balance sheet metrics will be further enhanced in fiscal 2016 from initiatives to further reduce inventory and generate additional cash from operating activities in fiscal 2016.

Preliminary Fiscal 2015 Full Year Results

For the full year ended Jan. 31, 2015, revenue is expected to be approximately $1.90 billion compared to $2.23 billion last year. Pre-tax loss for fiscal 2015 is expected to be approximately $38 million. Excluding the aforementioned non-cash impairment charge of $31 million, realignment costs of $3 million and Ukraine currency devaluation of $6 million, adjusted pre-tax income is expected to be approximately $2 million. This compares to pre-tax income of $18.4 million, or adjusted pre-tax income of $28.4 million last year. GAAP net loss attributable to common stockholders for fiscal 2015 is expected to be in the range of $30.9 million to $32.0 million, or $1.48 to $1.53 per diluted share. Adjusted net loss attributable to common stockholders for fiscal 2015 is expected to be in the range of $1.4 million to $2.5 million, or $0.07 to $0.12 per diluted share. For fiscal 2014, GAAP net income attributable to common stockholders was $8.7 million, or $0.41 per diluted share. Adjusted net income attributable to common stockholders for fiscal 2014 was $16.5 million, or $0.78 per diluted share.

First Quarter Fiscal 2016 Realignment

To better align its business in certain markets, the Company is reducing its headcount by approximately 14%, which includes headcount reductions at stores in each of its operating segments and its Shared Resource Center. This includes the closing of three Agriculture stores and one Construction store. In addition, the Company is reducing discretionary spending levels across all parts of the business and is restructuring certain employee compensation and benefit programs to better align pay for performance. The realignment costs associated with the headcount reductions and store closings are estimated to total approximately $2.0 million, of which $0.1 million was recognized in the fourth quarter of fiscal 2015 and $1.9 million (or $0.05 per diluted share) is expected to be recognized in the first quarter of fiscal 2016. The full-year pro forma benefit to pre-tax earnings of this headcount reduction is estimated to be approximately $21 million (or $0.59 per share), which equates to a pro forma benefit of approximately $20 million (or $0.56 per share) for fiscal 2016.

Management Comments

David Meyer, Titan Machinery’s chairman and chief executive officer, stated, “Our Agriculture segment performance was impacted by continued industry headwinds in this segment. We reduced our equipment inventory by approximately $168 million in fiscal 2015, which enabled us to generate approximately $82 million of adjusted cash flow from operations. We believe we are well positioned to achieve further inventory reductions and strong adjusted cash flow from operations in fiscal 2016.”

Mr. Meyer continued, “We are implementing a realignment plan in the first quarter of fiscal 2016. These actions, combined with previously implemented initiatives in our International segment, are better aligning our cost structure with the markets we serve.”

“As we begin fiscal 2016, we remain focused on managing the controllable aspects of our business, including taking steps to further reduce our inventory levels and operating expenses. We are confident that these improvements, combined with our focus on improving operational performance, will drive strong cash flow from operations in fiscal 2016 and better position our business for future growth opportunities.”

Fiscal 2016 Modeling Assumptions

The following are the Company’s current expectations for certain fiscal 2016 modeling assumptions:

• Agriculture Same Store Sales Down 20% to 25%
• Construction Same Store Sales Flat
• International Same Store Sales Flat
• Equipment Margins Between 7.7 % and 8.3%
• Expect to be profitable on an adjusted diluted earnings per share basis