Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported final financial results for the fiscal fourth quarter and full year ended Jan. 31, 2015.

Fiscal 2015 Fourth Quarter Results

For the fourth quarter of fiscal 2015, revenue was $490.7 million, compared to $708.6 million in the fourth quarter last year. Equipment sales were $389.6 million for the fourth quarter of fiscal 2015, compared to $587.9 million in the fourth quarter last year. Parts sales were $50.7 million for the fourth quarter of fiscal 2015, compared to $61.4 million in the fourth quarter last year. Revenue generated from service was $29.4 million for the fourth quarter of fiscal 2015, compared to $36.6 million in the fourth quarter last year. Revenue from rental and other was $21.0 million for the fourth quarter of fiscal 2015, compared to $22.8 million in the fourth quarter last year.

Gross profit for the fourth quarter of fiscal 2015 was $68.1 million, compared to $97.0 million in the fourth quarter last year, primarily reflecting a decrease in agriculture equipment revenue. The company's gross profit margin was 13.9% in the fourth quarter of fiscal 2015, compared to 13.7% in the fourth quarter last year. Gross profit from parts and service for the fourth quarter of fiscal 2015 was 49.5% of overall gross profit, compared to 40.7% in the fourth quarter last year.

Operating expenses were 13.2% of revenue or $64.9 million for the fourth quarter of fiscal 2015, compared to 10.9% of revenue or $77.1 million for the fourth quarter of last year. The decrease in operating expenses was primarily due to decreased commission expense resulting from lower equipment gross profit, and cost savings associated with the company's realignment activities implemented in the first quarter of fiscal 2015, which included the closing of eight stores and other headcount reductions. The increase in operating expenses as a percentage of revenue was primarily due to the deleveraging of fixed expenses as total revenue decreased from the prior year.

In the fourth quarter of fiscal 2015, the company recognized a $31.0 million non-cash charge, primarily related to impairment of goodwill and other intangible assets within the Agriculture segment. In the fourth quarter of fiscal 2014, the company recognized a non-cash charge of $10.0 million, primarily related to impairment of goodwill and other intangible assets within the Construction and International segments.

Floorplan interest expense increased to $5.1 million for the fourth quarter of fiscal 2015, compared to $4.8 million for the same period last year, primarily due to increased interest rates.

The company generated $6.4 million in adjusted EBITDA for the fourth quarter of fiscal 2015, compared to $23.9 million for the same period of the prior year.

Pre-tax loss was $37.2 million for the fourth quarter of fiscal 2015, compared to pre-tax income of $2.8 million in the fourth quarter last year. Excluding the aforementioned non-cash charge, 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 was $5.0 million. For the fourth quarter of fiscal 2014, excluding the aforementioned non-cash charge, adjusted pre-tax income was $12.8 million. Adjusted pre-tax Agriculture segment income was $2.8 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 was $4.7 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 was $3.5 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 was $27.0 million, or $1.28 per diluted share, compared to $0.4 million, or $0.02 per diluted share, for the fourth quarter of fiscal 2014. The net loss for the fourth quarter of fiscal 2015 includes adjustments totaling $22.8 million, or $1.08 per diluted share, compared to adjustments totaling $7.8 million, or $0.37 per diluted share, for the fourth quarter of fiscal 2014. Excluding non-GAAP items, adjusted net loss attributable to common stockholders for the fourth quarter of fiscal 2015 was $4.1 million, or $0.20 per diluted share, compared to adjusted net income attributable to common stockholders for the fourth quarter of fiscal 2014 of $7.4 million, or $0.35per diluted share.

Fiscal 2015 Full Year Results

Revenue was $1.90 billion for fiscal 2015, compared to $2.23 billion for the prior year. Gross profit margin was 16.2% for fiscal 2015, compared to 15.6% for the prior year. The company generated $47.6 million in adjusted EBITDA in fiscal 2015, compared to $72.0 million in fiscal 2014. Pre-tax loss was $38.3 million for fiscal 2015, compared to pre-tax income of $18.4 million for the prior year. Excluding certain non-GAAP adjustments, adjusted pre-tax income was $2.3 million for fiscal 2015, compared to $28.4 million for the prior year. Net loss attributable to common stockholders for fiscal 2015 was $31.6 million, or $1.51 per diluted share, compared to net income attributable to common stockholders of $8.7 million, or $0.41 per diluted share, for the prior year. Excluding non-GAAP items, adjusted net loss attributable to common stockholders for fiscal 2015 was $1.9 million, or $0.09 per diluted share, compared to adjusted net income attributable to common stockholders of $16.5 million, or $0.78 per diluted share, for the prior year.

Balance Sheet and Cash Flow

The company ended fiscal 2015 with cash of $127.5 million, which is an increase of $53.3 million over the cash balance of $74.2 million at the end of fiscal 2014. The company's inventory level decreased to $879.4 million as of Jan. 31, 2015, compared to inventory of $1.08 billion as of Jan. 31, 2014, primarily reflecting a reduction in equipment inventory of $167.7 million (including equipment inventory classified as held for sale). The company had $627.2 million outstanding floorplan payables on $1.2 billion total discretionary floorplan lines of credit as of Jan. 31, 2015, reflecting a decrease of $121.5 million (including floorplan payables classified as held for sale) from the balance of $750.5 million as of Jan. 31, 2014. The company amended its bank syndicate credit facility in April 2015, and as a result of such amendment, was in compliance with all financial covenants of its credit facilities effective for the period ended Jan. 31, 2015. The company's total discretionary floorplan lines of credit were reduced to $1.1 billion in April 2015, reflecting lower current and expected equipment inventory levels. The reduced floorplan levels combined with lower long-term debt at the end of fiscal 2015 has improved the company's total liabilities to tangible net worth to 2.6 as of Jan. 31, 2015 from 3.1 as of the end of the prior year.

In fiscal 2015, the company's net cash provided by operating activities was $41.1 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, the company generated adjusted net cash provided by operating activities of $82.2 million in fiscal 2015, which represents an improvement of $133.0 million compared to adjusted net cash used for operating activities of $50.8 million in fiscal 2014.

First Quarter Fiscal 2016 Realignment

As previously announced, to better align its business in certain markets, the company has reduced 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, "As we stated in our preannouncement, our financial performance for the fourth quarter and full year fiscal 2015 was impacted by ongoing headwinds in the agriculture industry. Throughout the year we focused on managing the controllable aspects of our business and reduced equipment inventory by $168 million, which enabled us to significantly improve our adjusted cash flow from operations."

Meyer continued, "As we begin fiscal 2016, we are confident we are taking the right steps to manage through the current climate and to improve the position of our business. We remain committed to further inventory level reductions throughout fiscal 2016, and we have implemented a realignment plan that meaningfully reduces our operating costs and better aligns our cost structure with our markets. We believe that this, combined with recently implemented initiatives for our International segment, position our business for improved operational and long-term financial performance."

Fiscal 2016 Modeling Assumptions

The company is providing the following modeling assumptions for fiscal 2016 that it believes will provide investors with relevant information about expectations regarding financial results and business trends:

• 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%
• Expects to be profitable on an adjusted diluted earnings per share basis

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, is a multi-unit business with mature locations and newly-acquired locations. The company owns and operates a network of full service agricultural and construction equipment stores in the United States and Europe. The Titan Machinery network consists of 92 North American dealerships in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona, and New Mexico, including 2 outlet stores, and 16 European dealerships in Romania, Bulgaria, Serbia, and Ukraine. The Titan Machinery dealerships represent one or more of the CNH Industrial Brands (CNHI), including CaseIH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Capital. Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.