Equipment sales were $215.7 million for the third quarter of fiscal 2016, compared to $343.5 million in the third quarter last year. Parts sales were $73.8 million for the third quarter of fiscal 2016, compared to $80.7 million in the third quarter last year. Revenue generated from service was $34.1 million for the third quarter of fiscal 2016, compared to $42.4 million in the third quarter last year. Revenue from rental and other was $21.3 million for the third quarter of fiscal 2016, compared to $26.6 million in the third quarter last year.
Gross profit for the third quarter of fiscal 2016 was $67.1 million, compared to $84.7 million in the third quarter last year, primarily reflecting a decrease in Agriculture equipment revenue. The Company's gross profit margin was 19.5% in the third quarter of fiscal 2016, compared to 17.2% in the third quarter last year. This increase in gross profit margin primarily reflects a larger portion of gross profit coming from the Company's higher margin parts business. Gross profit from parts and service for the third quarter of fiscal 2016 was 65.3% of overall gross profit, compared to 61.0% in the third quarter last year.
Operating expenses were 15.5% of revenue, or $53.5 million, for the third quarter of fiscal 2016, compared to 14.1% of revenue, or $69.5 million, for the third quarter of last year. The decrease in operating expenses of $16.0 million was primarily due to cost savings associated with the Company's realignment activities implemented in the first quarter of fiscal 2016 in addition to other cost saving initiatives. 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.
Floorplan interest expense was $4.6 million for the third quarter of fiscal 2016, compared to $5.4 million in the third quarter of fiscal 2015. The decrease in floorplan interest expense is due to lower average interest-bearing inventory in the third quarter of fiscal 2016.
In the third quarter of fiscal 2016, the Company generated $17.5 million in adjusted EBITDA, compared to $19.0 million in the third quarter of last year. The Company includes floorplan interest expense in its EBITDA calculation.
Pre-tax income for the third quarter of fiscal 2016 was $5.7 million, compared to $5.7 million in the third quarter of last year. Excluding all non-GAAP adjustments, adjusted pre-tax income for the third quarter of fiscal 2016 was $6.9 million, compared to $6.2 million for the third quarter of 2015. Adjusted pre-tax Agriculture segment income was $4.3 million for the third quarter of fiscal 2016, compared to $6.1 million in the third quarter last year. Adjusted pre-tax Construction segment income was $1.3 million for the third quarter of fiscal 2016, compared to break-even in the third quarter last year. Adjusted pre-tax International segment income was $0.5 million for the third quarter of fiscal 2016, compared to adjusted pre-tax loss of $0.9 million in the third quarter last year.
Net income attributable to common stockholders for the third quarter of fiscal 2016 was $3.4 million, or earnings per diluted share of $0.16, compared to $2.4 million, or $0.11 per diluted share, for the third quarter of fiscal 2015. Excluding all non-GAAP adjustments, adjusted net income attributable to common stockholders for the third quarter of fiscal 2016 was $4.2 million, or $0.20 per diluted share, compared to $2.9 million, or $0.14 per diluted share, for the third quarter of fiscal 2015.
Fiscal 2016 First Nine Months Results
Revenue was $1.03 billion for the first nine months of fiscal 2016, compared to $1.41 billion for the same period last year. Gross profit margin was 18.4% for the first nine months of fiscal 2016, compared to 17.0% for the same period last year. The Company generated $32.5 million in adjusted EBITDA in the first nine months of fiscal 2016, compared to $41.5 million in the same period last year. Pre-tax loss was $3.6 million for the first nine months of fiscal 2016, compared to $1.1 million for the same period last year. Excluding all non-GAAP adjustments, adjusted pre-tax income was $1.8 million for the first nine months of fiscal 2016, compared to $7.2 million for the same period last year. Net loss attributable to common stockholders for the first nine months of fiscal 2016 was $2.8 million, or $0.13 per diluted share, compared to $4.6 million, or $0.22 per diluted share, for the same period last year. Excluding non-GAAP items, adjusted net income attributable to common stockholders for the first nine months of fiscal 2016 was $1.3 million, or $0.06 per diluted share, compared to $2.3 million, or $0.11 per diluted share, for the same period last year.
Balance Sheet and Cash Flow
The Company ended the third quarter of fiscal 2016 with cash of $78.4 million. The Company's inventory level, including amounts classified as held for sale, was $820.4 million as of October 31, 2015, compared to $1.1 billion as of October 31, 2014, primarily reflecting a $217.0 million reduction in equipment inventory. The Company had, including amounts classified as held for sale, $549.4 million outstanding floorplan payables on $1.0 billion total discretionary floorplan lines of credit as of October 31, 2015, reflecting a decrease of $211.8 million from the floorplan payable balance of $761.2 million as of October 31, 2014. The reduced floorplan levels have improved the Company's ratio of total liabilities to tangible net worth to 2.2 as of October 31, 2015 from 3.2 as of October 31, 2014.
In the first nine months of fiscal 2016, the Company's net cash provided by operating activities was $198.8 million on a GAAP basis. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, the Company generated adjusted net cash provided by operating activities of $32.9 million in the first nine months of fiscal 2016, which represents an improvement of $48.0 million compared to adjusted net cash used for operating activities of $15.1 million in first nine months of fiscal 2015.
On October 28, 2015, the Company entered into a Second Amended and Restated Credit Agreement with a group of banks led by Wells Fargo Bank, National Association, that amended and restated the Company's $362.5 million credit facility dated March 30, 2012. The new credit facility reduced interest rates and provides for a secured credit facility in an amount up to $350.0 million, consisting of a $275.0 million floorplan facility and a $75.0 million working capital revolving credit facility.
Management Comments
David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "Our third quarter financial performance highlights our focus on positioning our business to navigate the challenging operating environment, which enabled us to improve adjusted net income compared to the prior year period. This improvement reflects the successful implementation of our realignment plan which helped generate $42 million in operating expense savings for the first nine months of fiscal 2016 and better aligns our cost structure with current trends. In addition, we executed on balance sheet initiatives including inventory reduction, which contributed to the Company generating $33 million in adjusted cash flow from operating activities, and entered into a lower interest rate credit facility. Our Agriculture segment sales continue to be impacted by ongoing industry headwinds, and our third quarter results were also impacted by lower than expected contribution from our parts and service business as farmers throughout the Upper Midwest experienced relatively favorable harvest conditions that required minimal equipment maintenance. In addition, our Construction segment was impacted by lower oil prices and reduced demand for equipment from agricultural customers. Based on our year-to-date results and outlook for the fourth quarter, we are updating our annual modeling assumptions."
Mr. Meyer continued, "As we begin the final quarter of fiscal 2016 and look toward next year, we remain focused on diligently managing the controllable aspects of our business, including further inventory reductions, which will continue to generate strong adjusted cash flow from operating activities. While we continue to face near-term headwinds, we remain confident in the long-term outlook for each of our business segments. Our Construction and International segments already have begun to realize improved profitability as a result of execution on our key initiatives to improve these areas of our business. For our Agriculture segment, although farmers are operating with a cautious sentiment in the current environment, they continue to carry strong balance sheets and global trends indicate long-term demand for agriculture commodities."
Fiscal 2016 Modeling Assumptions
The Company is updating 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 28% to 33%
- Construction Same Store Sales Down 8% to 13%
- International Same Store Sales Flat to Down 5%
- Equipment Margins Between 7.7% and 8.3%
- On an adjusted diluted earnings per share basis, the Company expects a loss on an annual basis, despite anticipated improvement in fourth quarter results in fiscal 2016 compared to fiscal 2015
